August 1, 2023
IT spending in 2023 is more robust than originally expected. That’s according to Gartner, which revised its early 2023 figure from 2.4 percent year-over-year growth to 5.3 percent — despite economic uncertainty in the face of a likely U.S. recession.
The uptick applies to SMBs as well as enterprises. Between now and 2027, a recently revised forecast from Analysys Mason predicts, IT spending by SMBs will grow at a CAGR of 7.2 percent. The firm’s detailed findings include the following:
- SMBs will be cautiously optimistic throughout 2023. Global economic challenges mean that SMB IT spending is expected to slow down, and SMBs will be more selective about how they invest in IT throughout 2023.
- Critical shifts in key category priorities. SMBs will continue to invest in IT solutions that support hybrid work environments. However, IT priorities will focus on solutions such as managed services, cloud infrastructure and cyber security.
- Partner ecosystem transformations. Strategic partners will be SMBs’ preferred purchase channels. SMBs will shift their IT purchases to channel partners that can assist with their digital transformation initiatives and business continuity. Strategic advice and value-added service/support will be a key selection criteria when choosing partners.
- Bounce back spending is expected from 2024. The rate of SMB IT spending growth worldwide will increase to 6.9% year-on-year in 2024 and will continue to rise to 8.3% year-on-year by 2027.
Globally, the IT market is expected to reach $4.6 trillion by the end of 2023, up slightly from the previous year. The firm also revealed that 73 percent of supply chain IT budgets for 2023 are being allocated to growth and performance.
“Macroeconomic headwinds are not slowing digital transformation,” John-David Lovelock, Distinguished VP Analyst at Gartner, said this past spring. “IT spending will remain strong, even as many countries are projected to have near-flat gross domestic product (GDP) growth and high inflation in 2023. Prioritization will be critical as CIOs look to optimize spend while using digital technology to transform the company’s value proposition, revenue and client interactions.”
Lovelock went on to say that the “balancing act” CIOs face “is evident in the dichotomies in IT spending. For example, there is sufficient spending within data center markets to maintain existing on-premises data centers, but new spending has shifted to cloud options, as reflected in the growth in IT services.”
Gartner’s IT spend prediction for 2024: Continued growth, largely driven by the rapidly expanding infrastructure-as-a-service market. “For the first time, price is a key driver of increased spend for cloud services segments, rather than just increased usage.”
Dilip Venkatachari, senior executive vice president and global chief information and technology officer at U.S. Bank, echoed those sentiments. “As more and more workloads migrate to the cloud, managing cloud expenses has become an important priority,” he told CIO.com. “We need to track and attribute expenses to specific applications over time. Knowing where the greatest demands are is the first step to being able to manage costs.”
For Tracy Woo, a senior analyst at Forrester Research, efficiency is key in 2023 and beyond where IT spending is concerned. “People realize the cloud isn’t a proof of concept anymore and that they need to batten down for a possible recession,” she said. “They realize they need to get the most out of what they’re spending, and they have to be smart and strategic about what they’re doing.”
As Rick Villars, group vice president for worldwide research at IDC, told CIO.com, his firm predicts that 50 percent of all IT spending in 2024 will be on cloud services because it’s the best way to target IT cost efficiencies. “When you tighten belts, you look at your biggest budget item,” Villars said.
Gartner’s Lovelock also stressed that tech CEOs in particular “must urgently ensure they are moving their organization forward by conserving working capital, monitoring the impact on cash, securing access to credit and keeping a close eye on talent and culture. Once the organization is properly prepared, tech CEOs can then direct and engage employees to find, accelerate and execute on market opportunities.”
On the subject of tech talent, Gartner predicted, demand will continue to outstrip supply — even as layoffs have rippled across the sector. “Tech layoffs do not mean that the IT talent shortage is over,” Lovelock noted. “IT spending on internal services is slowing in all industries, and enterprises are not keeping up with wage rate increases. As a result, enterprises will spend more money to retain fewer staff and will turn to IT services firms to fill in the gaps.”
Writing in Forbes last month, TPx chief marketing officer Lauren Wickstead, advised that IT is now so crucial to a company’s overall health that its organizational role should be rethought — and far more appreciated.
“It’s not an overstatement to say it’s what powers modern business; that should be readily apparent after the past few years,” Wickstead wrote. “The wrong technology makes those efforts exponentially more challenging, and amid the pandemic, some companies made technological decisions they now regret. Now is the time to remedy those missteps.”
She added, “We can now no longer take the IT team or the solutions they provide for granted. While we can’t predict the future, we need to start planning for the unexpected.”
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