Microsoft Software Spending to Increase 14 Percent in 2024

Microsoft Software Spending to Increase 14% in 2024

Microsoft Software Spending to Increase 14 percent in 2024
Per Gartner, enterprises worldwide are expected to spend 14% more on Microsoft software in 2024.

Software is the second-highest IT spend category right behind IT services.  As a result, sourcing, procurement, and vendor management leaders are analyzing Microsoft software cost-saving opportunities such as third-party Microsoft support to help offset the growing spend.

2024 Worldwide Increase in IT Spending Forecasted

IT spending increase forecasted for 2024
The five major markets of devices, data center systems, software, IT services and communication services are all expected to grow in 2024, according to Gartner data.

Spending on data center systems is expected to grow from $237 billion this year to $260 billion in 2024, up 9.5 percent annually.

The devices market is expected to reach $722 billion in 2024, up 5 percent compared with $689 billion this year.

Worldwide spending on software is projected to increase from $916 billion in 2023 to $1.04 trillion next year, representing an annual increase of nearly 14 percent. Software will see the highest increase of spending next year, Gartner said.

Gartner predicts the largest tech market next year will be around IT services. Global spending on IT services is expected to reach approximately $1.55 trillion in 2024, up more than 10 percent compared with $1.4 trillion in 2023.

The global communications services market is predicted to increase to $1.5 trillion in 2024, up from $1.45 trillion this year, representing modest 3 percent year-over-year growth.

Worldwide spending on software is projected to increase from $916 billion in 2023 to $1.04 trillion next year, representing an annual increase of nearly 14 percent. Software will see the highest increase of spending in 2024.

Generative AI Will Not Impact 2024 IT Spending

While generative artificial intelligence (AI) is top of mind for many business and IT leaders, it is not yet significantly impacting IT spending levels.

In the longer-term, generative AI will primarily be incorporated into enterprises through existing spending.

Generative AI’s best channel to market is through the software, hardware and services that organizations are already using. Every year, new features are added to tech products and services as add-ons or upgrades. Most enterprises will incorporate generative AI in a slow and controlled manner through upgrades to tools that are already built into IT budgets.

Generative AI impact on IT spending in 2024

Azure Drives 2024 Microsoft Software Spend Increase

Microsoft Azure spend increase in 2024
Azure spending has cooled but is still the largest additional Microsoft software spend across all industries and organization sizes.

Microsoft Azure has about 22% of the global Cloud infrastructure market while the leader Amazon, has 32%. Azure spending is forecasted to grow 25-30% in 2024.

Microsoft is “still helping customers use the Microsoft Cloud to get the most value out of their digital spend, and driving operating leverage,” CEO Satya Nadella said in the earnings release. Enterprise clients are still finding ways to save money on cloud spending, a trend multiple large cloud infrastructure providers have flagged in the past few quarters.

Meanwhile, clients are flocking to new generative AI tools in the cloud that are enhanced with software from Microsoft-backed startup OpenAI. The Azure OpenAI Service now has 18,000 customers, up from 11,000 customers in July. Higher capacity for graphics processing units in Azure boosted growth.

More than half (55%) of top technology officers across sectors of the economy say they plan to purchase enterprise-level gen AI software, such as Microsoft Copilot, in the next six months. While another third (32%) said they have not made the spending decision, only 13% said they would not be acquiring similar gen AI capabilities. Source: CNBC Technology Executive Council Survey

Microsoft AI and Copilot spend in 2024

Expect More Microsoft Price Increases in 2024

Microsoft price increases coming in 2024 - US, India, Asia (Japan, South Korea, Taiwan, China)
As we anticipate further Microsoft price hikes in 2024, effectively managing Microsoft software spend remains a top priority for enterprise vendor management leaders.

U.S. Public Sector
Microsoft 365 price increases will impact the public sector beginning in March 2024, with an increase of 10% for Office 365 G1. In March 2025 prices will increase yet again by 5%. For those public sector organizations with major contract renewals due in 2024 and 2025, these increases may amount to millions of dollars.

To address public scrutiny on government spending, agencies must prioritize value for taxpayers’ money through initiatives like software and cloud cost optimization.

India
Microsoft customers in India will see a 7% price increase in both its commercial on-premises software and online services effective February 1, 2024. This will be the third consecutive year of prices increases by Microsoft in India following a signicant option of Microsoft 365 and Dynamics 365 during the pandemic years of 2020-2021.

Asia
Japanese customers will see an increase of 20% for both commercial on-premises software and online services, effective April 1, 2024 – the highest rise in prices announced by the software giant.

Bills in South Korea, and Taiwan will rise on February 1, 2024. Korean customers will pay 8% more for cloudy services and 10% percent more for on-prem wares.

Taiwan was spared an on-prem increase, but users there will pay 7% more for cloud services. Chinese customers will get the same increase on May 1, 2024.

 

Third-Party Support - 2024 Microsoft Cost-Savings Opportunity

Third-party support is a big cost-savings opportunity for 2024
Software is the second-highest IT spend category, which drives sourcing, procurement, and vendor management leaders to analyze cost-saving opportunities from independent third-party support providers.

Use the Gartner market guide to reduce your Microsoft software support costs by 50% or more, resulting in millions of dollars in savings per year for enterprises worldwide.

Key Findings

  • Sourcing, procurement, and vendor management (SPVM) leaders who research and analyze all viable maintenance options for their Microsoft software are well positioned to recommend cost optimization alternatives to their stakeholders.
  • Comparing third-party software support (TPSS) offerings and the support policies and contract term governing the Microsoft products minimizes the risk of selecting a third-party provider with lower prices but insufficient service offerings.
  • A critical success prerequisite to engaging third-party software support (TPSS) is a thorough evaluation and comparison of the TPSS support offerings and contract terms with those governing the Microsoft products.

SPVM leaders reduce cost and operational risk when they engage stakeholders for a TPSS risk-benefit analysis and then arrange proof of concept (POC) engagements for the providers to showcase their service offerings and support capabilities.


Source: Market Guide for Independent Third-Party Software Support for Megavendors

27 November 2023 – Gartner ID G00778849 – 26 min read

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