Worldwide government IT spending to grow 5% in 2022: Gartner

XaaS will emerge as the new area of investments as governments scale digital transformation initiatives, says Gartner

Worldwide government IT spending is forecast to total $565.7 billion in 2022, an increase of 5% from 2021, according to Gartner, Inc. “The last few years of enduring pandemic challenges have mobilized a wave of digital transformation activities in government organizations across the world,” said Daniel Snyder, director analyst at Gartner. “Governments are executing innovative activities by harnessing technology to streamline digital services, advance automation processes and evolve citizen experiences.”

In 2022, government IT spending is forecast to increase across all segments except internal services and telecom services. Continuing the trend from 2021, software is forecast to record the strongest growth across all segments in 2022. As legacy modernization continues to be a priority in government organizations, growth in the data center systems segment will continue to slow though the forecast period (see Table 1).

Table 1. Worldwide Government IT Spending, 2021-2022 (Millions of U.S. Dollars)

Source: Gartner (June 2022)

Governments continue to invest in critical application software that directly support end user interfaces driving strong growth in this segment. Spending on telecom services is set to decrease in 2022 as governments reduce spending on expensive legacy systems in favor of digital service delivery models.

In India, government IT spending is forecast to total $9.5 billion in 2022, growing 12.1% from 2021. “Contrary to the worldwide spending, all segments will experience growth in 2022 in India,” said Apeksha Kaushik, principal analyst at Gartner.

Software will continue to be the highest growing segment in India, in 2022, followed by IT services (see Table 2).  Modernization has been a longstanding objective of government organizations for more than the past decade, but the last few years of enduring pandemic challenges have mobilized a wave of transformation activities. Now, more than ever, governments are executing innovative activities by harnessing technology to streamline digital services, advance automation processes and evolve citizen experiences and building a data fabric. These investments will continue as the confluence of stimulus measures and increases in annual IT budgets at most national and state levels empowers governments to continue the existing momentum.

Table 2. India Government IT Spending, 2021-2022 (Millions of U.S. Dollars)

Source: Gartner (June 2022)

Anything-as-a-Service Model Emerges as Pay-As-You-Use Gains Momentum

Anything-as-a-Service (XaaS) is gaining popularity across government organizations as it provides better return on investment normalizing IT spend over time making budgeting for IT more predictable, while avoiding the accrual of technical debt. Gartner predicts that by 2026, most government agencies’ new IT investments will be made in XaaS solutions.

An XaaS model for modernizing infrastructure and accelerating innovation is an increasingly attractive approach to acquiring new digital capabilities and managing IT infrastructure — especially as governments are facing increased pressure to provide digital delivery of services, despite constrained resources

“The pandemic sped up public-sector adoption of cloud solutions and the XaaS model for accelerated legacy modernization and new service implementations,” said Kaushik. “Fifty-four percent of government CIOs responding to the 2022 Gartner CIO Survey indicated that they expect to allocate additional funding to cloud platforms in 2022, while 35% will decrease investments in legacy infrastructure and data center technologies.”

Mounting concerns with privacy and data protection have also fostered new regulations about the use and location of citizen data. Few mission-critical solutions delivered in the cloud are increasingly sought across numerous verticals in government, including administration, tax and finance, health and human services, community development and planning, and regulatory agencies.

With the ongoing talent challenges facing organizations, XaaS makes it easier for government organizations to find the right talent via XaaS operating models. XaaS delivery models require different internal IT skill sets and place less demand on the organization to develop or acquire emerging IT skills, which are often hard to find and difficult for governments to afford.