It would take a 'catastrophic' recession to stop tech spend growth, says IBM boss

Tells Economic Club of New York no one he knows is trimming IT budgets

Corporations large and small are not yet showing any signs of clipping their enterprise technology spending says IBM's boss, despite mounting fears about the parlous state of economies around the world. Maybe it's wishful thinking.

Blue Blue CEO Arvind Krishna was yesterday speaking at an Economic Club of New York event and said that short of a "catastrophic recession," he anticipates no change to companies' tech budgets.

“As I talk to CEOs and CIOs across the globe, almost none of them are talking about cutting down technology spending," he said.

One potential trouble spot highlighted is the energy crisis in Europe.

Cisco rolled out results this week and CEO Chuck Robbins said the energy issue was "forcing" local organizations to "take a look at their P&L as you would have to and where they spend their dollars." The winter in the region remains mild, though, and that is a "positive sign."

Businesses flocked to the cloud during the pandemic as employees were forced to work remotely, and although IBM wasn't the major beneficiary of this splurge – AWS, Microsoft and Google were in the infrastructure segment – IBM is in the right wheelhouse.

IBM has had more success pitching hybrid cloud services to customers. This week, research by Micro 4, a division of UNICOM Global, indicated 83 percent of IBM mainframe customers are intending to modernize their systems and 46 percent of those want to opt for IBM's hybrid cloud approach.

Despite Krishna's findings from discussions with customers, Gartner reckons the "macroeconomic downturn" topped the list of emerging risks facing organizations, according to its report last month.

Gartner reckons global tech spending will grow 0.8 percent year-on-year in 2022, with datacenter systems, software and IT services (including the cloud) all contributing to this. Further, it thinks spending will grow 5.1 percent in 2023.

Numerous tech companies are battening down the hatches, including Meta, Amazon and Twitter – which made massive layoffs recently. These businesses are more consumer facing, and in the case of Twitter is facing some unique challenges.

Google is also coming under some pressure to reduce headcount following challenges in the digital advertising space. Its cloud business is growing – customers are spending more – but it still hasn't found a way to make sustained profits. Google grew headcount by 37,000 in the past year alone, something Amazon and Meta did too – recently announcing 10,000 and 11,000 redundancies respectively.

Biz technology vendors mostly grew in a more measured way and now are freezing recruitment – or in the case of IBM, moderating their rate of hiring, as is Salesforce, which has hit the brakes on US recruitment. Big Blue employed 282,100 staffers as of December last year.

It must be noted though that IBM did wave goodbye to its problem child a year ago when it spun out the perennially loss-making infrastructure service organization, now known as Kyndryl. Since then, financial results have improved.

IBM's investors will be crossing their fingers Krishna is right and customers do keep on spending next year to maintain that run of form. After a decade of declining fortunes under the previous leadership, who could blame them? ®

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