Global stability to determine technology spend in 2025

Geopolitical risks are rising by the day. At a time, Russia-Ukraine war shows no signs of ending, a raging conflict between Israel & Iran threatens to further increase the geopolitical risks. Last five days have seen missile strikes between Israel & Iran with no possibilities of any truce for now. Historically, Middle East has been one of geopolitical flashpoints for several decades. After a brief period of calmness, the region has been witnessing conflicts in several countries. Gaza, Syria, Iran and Israel are all in news in the last three years. As the largest supplier of oil and gas, Middle East plays a vital role in the economic growth of the world. Nations in this region are in many ways key to the energy security of the world. Since the beginning of Russia-Ukraine war, severe disruption has happened to the oil market. European nations, which used to get oil & gas from Russia-another major producer- have put sanctions on Russia and have restricted use of Russian oil directly. This situation has led to higher oil prices for European nations, leading to an inflationary environment. In the last three years, this has adversely impacted the technology spend by European enterprises. Most of the deals that have bagged by global IT players are related to cost saving domain than digital transformations one. Things have started improving towards the end of 2024 and there was a hope that 2025 will be a better year as far technology spend is concerned. Similar was the case for US. US, the technology power house and the largest market for IT firms globally- was stabilizing its economy with inflation inching lower. There was a wide spread hope that if Donald Trump gets elected that then US economy will propel the global growth. However, all such hopes have been dashed with Trump administration imposing reciprocal tariffs on all their trading partners. Under Trump, the US is trying to rewrite the world order. Various fault lines have emerged between US and its European allies on multiple issues. The domestic economy of the US is not likely to perform better than earlier quarters owing to the uncertainty created due to tariff. With wide spread import duty on foreign products, the US economy may see inflation inching up again. If that happens, all the projection about sound technology spending in 2025 will be gone out of window. When AI is making deep inroads with a possibility of job losses across sectors, such change may worsen the demand environment.

For now, global tech firms including IT services companies are in a wait and watch mode. Though many tech giants like Google, Microsoft, & others have started reducing headcount, those are more AI-related than arising from global economic uncertainty. However, if the geopolitical situation lingers, enterprises may initiate significant cost cutting measures. Already, the oil market has roiled with crude shooting up to $77 level per barrel. Gold as the save haven option is being favoured more with its prices reaching record levels. Against this backdrop, technology spending will hinge on peace & stability across major economies.