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Citi

China’s IT Software Spending Remains Strong

  • According to a Citi proprietary Innovation Lab survey conducted with 500 enterprises in China during May 2020, 59% of Chief Information Officers (or other decision makers related to IT spending) believed their planned IT spending may be impacted by the COVID-19 outbreak. 50% are expected to increase their IT spending, while 40% may reduce, indicating resilience, going forward, in IT spending in China.

 

  • 6 key trends: 1) software may receive more spending share than hardware and services; 2) software, cloud and security IT spending rank top 3 for the next three years; 3) SaaS (software as a service) may take a larger share of public cloud spending; 4) better security in data storage and lower migration costs may accelerate cloud adoption; 5) market consolidation to continue for IaaS (infrastructure as a service); and 6) domestic software (ERP/CRM – Enterprise resource planning / customer relationship management) leaders are expected to gain market share.

 

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  • Software spending remains strong. According to IDC’s forecast in May 2020, China’s IT spending may grow 2.7% YoY to Rmb2.1tn in 2020E (compared to -2.7% YoY worldwide). Software seems to benefit the most as 49% of surveyed firms plan to increase spending, vs. 35% planning to cut. Hardware and IT outsourcing/services may face more headwinds with 44% and 53% of firms likely to cut spending respectively. With the government’s social distancing requirements due to COVID-19, many project-based contracts may have been temporarily delayed in 1H20. On the flip side, enterprise digitalization trend has accelerated with more people now working remotely and online.

 

  • Majority (58%) of respondents expect an upward revision to their IT budgets in the next 12 months. By segments, spending on software, cloud and security could drive the overall IT budget growth in the next three years.

 

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