IT spending in Latin America will outpace GDP growth in 2023, according to IDC

This is a machine translation of IDC's press release, originally in Portuguese

São Paulo, December 13, 2022 – Even in the face of major macroeconomic challenges, IT infrastructure investments in Latin America will outpace GDP growth in 2023, according to IDC FutureScape: Latin America Predictions 2023 by IDC Latin America, leader in market intelligence, consulting services and conferences with the Information Technology and Telecommunications industries. The study, which reveals the main expectations of the IT industry in Latin America for the coming year and their implications, also shows that the challenges will not only be technological, but human, since there is a need for cultural changes in order to believe in an automated future with more education and training of IT talent to face new business challenges.

For Alejandro Floreán, Vice President of Research and Consulting at IDC Latin America, “despite the expected GDP growth rate for the region being only 2.1%, investment in technologies focused on business, such as cloud, networks, storage and other professional services, will increase by about 12%. In addition, emerging digital technologies such as artificial intelligence, machine learning, automation and robotics are expected to grow by 69% by next year, which represents 32 times the growth rate of the Latin American economy in recession”.

Floreán complements the analysis stating that "2% is a low growth rate, considering all the potential that Latin America offers. However, the good news is that corporate spending on IT is growing at the margin of the rest of the economy. The only category that we see having a negative impact is the device market, i.e. PCs, smartphones and printers, and this is due to inflation".

Forecasts for 2023

1. Connectivity, security and computing

By 2028, more than 35% of the IT budgets of the top 5,000 companies in Latin America will go towards connectivity, security and computing. CIOs will focus on IT governance and management and create autonomous IT teams that can quickly identify and resolve issues, helping the business grow.

2. Investment in 'tech by wire' technology

By 2026, 40% of IT infrastructure will adopt tech by wire technologies, which aggregate artificial intelligence and data for corporate decision making. Despite the benefits that automation brings, tech by wire will be perceived as a challenge for IT team members who need to develop fundamental skills to deliver maximum value to their organizations.

"Managing tech by wire will be a challenge. Companies will have to build control platforms and adopt flexible systems so as not to overload their current pool of IT talent", warns Pietro Delai, Director of Business Solutions at IDC Latin America.

3. IT skills gap

Information technology is evolving much faster than humans can keep up, and IDC predicts that by 2026, 70% of enterprises will not fully leverage the added value that the cloud, data, and automation can provide. With the challenge of managing increasingly complex workloads, companies will need to work closely with IT vendors and their HR departments to ensure they find and train the right talent in the industry.

"Professional skills and inflation are the two topics that most concern Latin American organizations. That's why it's important to align business and technology strategies, in addition to training teams", emphasizes Diego Anesini, Vice President of Data & Analytics from IDC Latin America.

4. Data sovereignty

As companies store their data in different locations or with different cloud providers, they increasingly face the challenge of data sovereignty, where data is subordinated to the laws and governance structures of the country where it was collected rather than where it is stored. .

By 2026, this data sovereignty will drive CIOs to shift staffing, budgets and operational processes across more than 30% of data and IT assets.

“It is a complex challenge inserted in a context where digital borders are disappearing. It will be important to have clear laws and regulations that regulate digital services”, comments Floreán.

5. As a Service

XaaS (Everything as a Service) is a term that refers to the delivery and management of any technology (usually hardware or software) as a cloud service by a third-party provider, and an alternative to providing and installing it on-premises.

The pay-as-you-go business model can offer advantages when it comes to cost savings, but it can also make it difficult to project long-term costs and benefits. This can delay the adoption of solutions that are interesting to companies, especially when the solution crosses organizational spaces. Without considering other benefits such as innovation and operational efficiency, the adoption of infrastructure/software as a service will drop to 40% in 2026.

6. Experience included

The as-a-service model also promises to help companies fill their IT job shortage, which is expected to reach 2.5 million in Latin America by 2026. By the end of 2026, 30% of aaS offerings will be in security and business operations. must have "experience included".

“The need to find IT specialists will drive the adoption of the as-a-service model in the region, as it will facilitate the sharing of skill sets,” explains Anesini.

7. Supply chain setbacks

Not all delays in IT investment can be attributed to a lack of training or awareness of the benefits that information technology can provide. Supply chain bottlenecks, especially for silicon, seen during the pandemic, will continue for years to come.

For 2027, 20 high-visibility digital product launches – which rely on intelligent automation and aaS delivery – will face significant delays due to these issues.

According to Floreán, resolving supply chain issues will be essential for Latin America in the short term, as more and more global industries seek to invest in the region given its importance as a manufacturing and food production hub.

“Supply issues will have a major impact on technology investment decisions in the region, particularly in 5G infrastructure, cloud computing and the developer ecosystem,” predicts Floreán.

8. IT Modernization

Latin American companies will have to act quickly to modernize their technology infrastructure to ensure data can be shared and not trapped in silos or servers disconnected from other parts of the organization.

By 2027, 25% of companies trying to use wired technology offerings will still struggle with the proliferation of isolated control systems that increase connectivity costs and limit data sharing.

“Trying to achieve consistency in the use of multiple platforms based on control planes will present operational and security challenges for IT organizations,” analyzes Delai.

9. Cultural change

Cultural issues will also act as an impediment to the adoption of newer technologies in the region. By 2027, around 50% of the top 5,000 organizations in Latin America will experience slower growth due to a lack of confidence in emerging digital technologies by business leaders.

"It takes time and determination to identify applications that can be automated and the skill gaps to be filled. This does not happen overnight", warns Anesini.

10. Artificial vision

By 2028, the fastest growing companies in Latin America will be those with the ability to implement and use machine vision as an inherent feature of any new product or process.

"There is a huge opportunity for the 'Digital First' industries in retail, entertainment and manufacturing. Data management and protection are critical, as is efficiency in all areas of business. We need to drive connectivity and invest in a 'machine vision' of the future to succeed in its digital transformation", concludes Floreán.

About IDC - International Data Corporation (IDC) is a leader in market intelligence, consulting services and events for the information technology, telecommunications and consumer technology markets.

With more than 1,300 analysts worldwide, IDC provides global, regional and local expertise on technology and industry trends and opportunities in 110 countries.

IDC's analysis and expertise help IT professionals, executives, and the investment community make informed technology decisions and achieve key business objectives. Founded in 1964, IDC is a subsidiary of IDG, the world's leading technology, research and event media company.