Inflation, recession, pah! IT budgets set to rise in 2023

Turns out all it took was a business-disrupting global pandemic

Despite recession fears, most companies are planning to increase IT budgets next year.

Spiceworks Ziff Davis (SWZD) concluded as much in its 2023 State of IT report, out today. Of the nearly 1,000 IT buyers surveyed, 83 percent said they were worried about how a recession in 2023 could affect their businesses. Despite that, just over half said they plan to increase their IT spending in 2023, while only 6 percent said they're reducing their IT budget. 

Peter Tsai, senior technology analyst at SWZD, said during a press conference that he found a surprise when cross-referencing some of the data: Among companies preparing to make cuts to their overall business spending in 2023, 68 percent were still planning to increase their IT budgets. 

IT: Finally a priority?

Around 40 percent of those budget increases will be due to inflation, although price increases were only a secondary consideration for respondents, the report said.

Instead, IT budgets are being primarily planned around the need to replace outdated hardware, an increased priority on IT projects, employee growth and security concerns. What this all points to, said Jim Rapoza, VP and principal analyst at SWZD subsidiary Aberdeen Strategy and Research, is that the business world had an epiphany during the early days of the COVID-19 pandemic.

"Businesses that invested in technology during the pandemic saw significant benefits. Our research revealed improvements across performance, reliability, security, and even reduced overall IT costs among organizations that modernized their infrastructure — even if it was initially out of necessity," Rapoza said. 

Lessons learned during the early days of the pandemic are still fresh in the minds of many leaders, Rapoza added, saying that those who chose to invest in IT modernization and infrastructure didn't just survive the pandemic – many thrived. Because of that, those leaders now see IT investment and agility as a key part of future planning. 

But that doesn't mean areas of IT investment for the coming year will remain the same. With many businesses returning to the office, spending on cloud services is predicted to drop, while spending on managed services is likely to rise. Much of the reason for that shift is "right-sizing" that businesses will be doing to "support their employees wherever it makes most sense," (ie, in-office or remote) the report said. 

Because much of the past few years of IT growth has centered around adding services needed to support a workforce working remotely, managed services will continue to be a part of IT budgets. 

"After businesses spent the last couple of years modernizing, many are likely now turning to services to help them maintain their new technology stacks," reads the report. 

No one wants another March 2020

The general tone of the predictions for 2023 are optimistic, and a large part of that hinges on the idea that, as SWZD global director of IT Jeff Grettler said, "people got scared straight" by pandemic disruptions.

"This was the ultimate disaster recovery scenario," Grettler said in response to questions from The Register. He said that, while plenty of organizations managed to make things work, they don't necessarily want to end up in the same place where a disaster - or another wave of COVID-19 - necessitates a rapid shift in business operations. 

"Fear is a powerful ally," Grettler said. 

Ultimately, the report concludes, the business world learned a lesson about agility, and by extension prioritizing IT spending, in 2020. IT departments may have suffered then, but if SWZD's predictions pan out that won't be the case in the future. 

Bottom line: The COVID-19 pandemic "transform[ed] how decision makers think about and ultimately value technology in the workplace," it said. ®