Government IT spending to increase by 8% in 2023, fueled by digital investments

Governments Prioritize Digital Transformation in Response to Global Challenges

According to Gartner, Inc., worldwide government IT spending is projected to reach $589.8 billion in 2023, representing a 7.6% increase from the previous year.

Government Chief Information Officers (CIOs) are facing various global challenges, such as inflation and workforce scarcity, which are impacting their ability to deliver services effectively and ensure organizational accountability. Additionally, the “great resignation” phenomenon and competition from the commercial sector have prompted governments to reassess their strategies to address internal talent shortages, stated Apeksha Kaushik, Principal Analyst at Gartner.

In 2023, government organizations are steadfast in their commitment to digital initiatives. A growing number of governments are allocating their IT budgets towards replacing legacy applications. The 2023 CIO and Technology Executive Survey conducted by Gartner revealed that 57% of government CIOs plan to increase funding for application modernization, a significant rise from 42% in 2022, as mentioned by Kaushik.

Furthermore, government institutions are emphasizing the long-term impact of their digital projects. Many of them have started implementing digital metrics directly linked to their organization’s public purpose or mission. Gartner predicts that by 2026, more than 75% of governments will measure the success of their digital transformation initiatives based on their enduring mission impact.

Software will continue to be the highest-spending segment in 2023. Investments in application modernization will be supported by an increased adoption of software-as-a-service solutions. The use of low-code application platforms (LCAPs) is also gaining traction, facilitating the acceleration of legacy modernization efforts.

Government spending on IT services will remain steady in 2023. However, compensation constraints and limited resources to attract and retain IT talent pose significant challenges due to the current IT talent shortage, according to Kaushik.

To drive innovation and modernize critical IT infrastructure and applications, some government organizations are embracing a multisourced workforce strategy. This approach optimizes the utilization of internal IT talent while investing in employee experience tools to foster innovation. Additionally, partnering with external IT service providers helps expedite time-to-value.

Throughout 2023, government organizations will continue to invest in initiatives that enhance access to digital services, responding to the increasing demand for seamless online experiences from constituents.

While digital transformation remains a top priority for governments, some government CIOs have acknowledged that they are not maximizing the benefits of their digital investments. Kaushik emphasized the importance of government CIOs moving beyond scaling digital solutions to ensuring that further investments have a direct impact on achieving the mission and public purpose of their organizations.