Posted on December 17, 2020

IT Budget Trends 2021: How are companies spending on IT?

A summary of three survey's regarding the "IT" budget for 2021.

“It’s not looking at what’s in the ‘IT budget’, but at all of those things across the business that can be influenced by IT, which is just about everything,” said James Anderson, research director at Gartner“If you’re not on the innovation end of trying to fund digitalization of your business, it’s likely some other company is coming up with some type of an optimization technology to eat your revenue.”

According to three survey’s this is how we are going to spend the “IT” budget in 2021:

Gartner CIO Agenda Survey

The 2020 Gartner CIO Agenda survey, which collected data from more than 3,000 CIO respondents in 89 countries and all major industries, was presented by Gartner analysts during the Gartner Symposium/ITxpo in October. As most IT budgets are based on a percentage of the revenue they expect a decrease in budget in 2020, however due to changes in the way we work they expect extra budget to shift to IT to accommodate changes.

Enterprise software is expected to have the strongest rebound in 2021 (7.2%) due to the acceleration of digitalization efforts by enterprises supporting a remote workforce, delivering virtual services such as distance learning or telehealth, and leveraging hyperautomation to ensure pandemic-driven demands are met. 

“With revenue uncertainty promoting cash from being King to being Emperor, CIOs are now prioritizing IT projects where the time to value is lowest,” said Mr. Lovelock.

“Companies have more IT to do and less money to do it, so they are pulling money out of the areas they can afford, such as mobile phone and printer refreshes, which is why there will be less growth in the devices and communications services segments,” added Mr. Lovelock. “Instead, CIOs are spending more in areas that will accelerate their digital business, such as IaaS or customer relationship management software.”

In response to COVID-19, customers have taken many activities they may have previously done in-person online. This change in behavior increased the demand for new digital products and services, a trend that will continue to increase going forward. Investing in digital, customer-facing technology is key to success in 2021 and beyond.

 
IT-budget

Harvey Nash/KPMG CIO Survey

Now in its 22nd year, the Harvey Nash / KPMG CIO Survey 2020 is the largest IT leadership survey in the world, with over 4,219 responses from CIOs and technology executives across 83 countries.

There is no doubting the pandemic’s dramatic effect on almost every aspect of business and life. The pandemic exposed a growing digital divide, shifted some priorities, and amplified many of the challenges that the IT organization faced prior to COVID-19. However according to this survey, fundamentals also remain, such as the top two priorities for boards: 1) improving operational efficiency; and 2) improving customer engagement – both long-standing priorities of the technology leader.

Almost half (47 percent) say the pandemic has permanently accelerated digital transformation and the adoption of emergent technologies.

Computer Economics IT Spending & Staffing Report

Market research firm Computer Economics published its 2020 results from the annual IT Spending & Staffing Benchmarks report, also reporting growth in operational budgets and general increases in IT spending.

Prior to the pandemic, they would have predicted that companies would have continued increases in IT operational spending in order to accelerate the pace of increased cost efficiency and to access new capabilities they are missing in their legacy systems. They believe companies in the position to do so will, in fact, increase their operational budgets. At the very least, companies will look to maintain as many new projects as possible. Unlike past recessions where cuts were required to save costs, the cloud in many cases gives companies a unique opportunity to decrease costs while maintaining capabilities.

But the supplemental survey on the effects of the pandemic indicates that companies are now accelerating projects for unified communications, remote work capabilities, business intelligence, and analytics in order to weather the storm.

One of the reasons why IT budgets are increasingly seen as adequate is that refreshing technology, lessening dependence on legacy systems, strategic outsourcing, and the use of cloud infrastructure and applications are an easier way to make room in the budget, rather than going to the CFO and asking for a large increase. Reducing in-house infrastructure and turning toward SaaS and cloud infrastructure, which often have a “pay-for-what-you-use” model, will allow for more cost flexibility. In other words, IT organizations have already been making many of the investments that will help in the downturn. Cloud applications, digital transformations, cloud infrastructure and data analytics is the top spending priority.

Conclusion

According to the surveys summarized above, IT budgets are growing in several key areas: digital initiatives, digital engagement, and operational efficiency. Covid-19 definitely has an impact. As remote working has never accelerated more than in 2020 the necessity to spend the budget on the right IT-strategy is important. According to the surveys summarized above, IT budgets are growing in several key areas: digital initiatives, digital engagement, and operational efficiency. As working from home has never accelerated more as in 2020 the necessity to spend the budget on the right IT-strategy is important!

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