August 5, 2021
As the United States and many other countries slowly transition back to a new normal in the wake of COVID-19, IT spending is finally starting to rise after a dip in 2020. According to a late January study by Gartner, worldwide IT spending will grow 6.2 percent this year and total more than $4 trillion worldwide.
“Last year, IT spending took the form of a ‘knee jerk’ reaction to enable a remote workforce in a matter of weeks,” said John-David Lovelock, distinguished research vice president at Gartner. “As hybrid work takes hold, CIOs will focus on spending that enables innovation, not just task completion.”
IT spending specifically related to remote work, which remains popular even as the pandemic wanes, will total $332.9 billion this year — up 4.9 percent from 2020.
“During this rapid rush to remote work, IT departments everywhere rapidly deployed technologies to maintain business continuity during the global health crisis,” SpiceWorks Ziff Davis said in its 2021 State of IT annual report. “The massive move to work-from-home policies spurred shifts in hardware, software and services spend, and will continue to make waves as many companies stick to flexible working arrangements permanently.”
Organizations that are ramping up IT spending include the U.S. Government, whose overall IT budget (excluding classified spending) for 2022 is $58.45 million. The Department of Homeland Security will see the biggest bump, from $7.3 million this year to around $8.2 million in 2022.
Notably, however, IT managers are making fewer budget decisions than in recent years. A 2021 survey by TechRepublic found that, more often than not, CEOs, CIOs and other C-level business managers have taken over that responsibility.
“CIOs have a balancing act to perform in 2021 — saving cash and expanding IT,” Lovelock said. “With the economy returning to a level of certainty, companies are investing in IT in a manner consistent with their expectations for growth, not their current revenue levels. Digital business, led by projects with a short time-to-value, will get more money and board level attention.”
Going forward, a significant factor in determining IT budgets will be company size, SpiceWorks Ziff Davis concluded. Hardware still accounts for the largest percentage of IT spend (though it’s down year-over-year) and software continues to take second.
“The need to upgrade outdated infrastructure will be the top factor contributing to increases in IT spending among small and mid-size businesses (1-999 employees),” according to SWZD. “An increased priority on IT projects is the top factor influencing IT budget growth in enterprises (1000+ employees) — at a rate significantly higher than in small and mid-size businesses — likely because enterprises are more likely to have experienced changes to their business operations causing them to re-prioritize tech investments to support their needs.”
SMBs in particular, SWZD noted, are spending or will spend a greater percentage of their 2021 IT budgets on hardware and software whereas enterprise organizations will allocate a greater percentage of IT budgets to managed services and hosted cloud. These managed services include managed hosting, storage and backup, and managed hardware support – with managed security services taking the 4th spot given the rise in security challenges associated with remote and hybrid work in the last 16-months. And rounding out the top 5 is managed cloud infrastructure – no big surprise given the movement of workloads to the cloud during the pandemic.
The SWZD report also noted that emerging tech adoption – 5G, HCI, edge computing, AI – would slow in 2021 as organizations continue to address remote and hybrid work concerns. But there are two exceptions that are expected to see increased YoY adoption: desktop virtualization and emerging security solutions. According to the study, 46% of businesses surveyed are using or planning to use VDI by mid-2022. And the increased adoption of security solutions is no surprise, given the mounting concerns about endpoint device security, vulnerability management and incident response in the last year.
“COVID-19 has shifted many industries’ techquilibrium,” Gartner’s Lovelock said. “Greater levels of digitalization of internal processes, supply chain, customer and partner interactions, and service delivery [will enable] IT to transition from supporting the business to being the business. The biggest change [in 2021] will be how IT is financed, not necessarily how much IT is financed.”
About Mindsight
Mindsight, a Chicago IT services provider, is an extension of your team. Our culture is built on transparency and trust, and our team is made up of extraordinary people – the kinds of people you would hire. We have one of the largest expert-level engineering teams delivering the full spectrum of IT services and solutions, from cloud to infrastructure, collaboration to contact center. Our customers rely on our thought leadership, responsiveness, and dedication to solving their toughest technology challenges.
Contact us at GoMindsight.com.