Good News for Channel: Tech Spending to Increase in 2023
There will also be more firms looking for managed services amid difficulties in hiring IT talent.
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While most organizations are concerned about a recession, most companies (58%) expect their revenues to increase YoY in 2023. Only 10% expect revenues to decrease.
At the same time, half of organizations plan to take precautionary measures to prepare for an economic slowdown in 2023. This includes re-evaluating vendors or contracts, decommissioning unnecessary infrastructure, focusing on new opportunities and hiring slowdowns.
While the need to update infrastructure and an increased priority on IT projects will be the primary drivers of budget increases in 2023, inflation will be a factor in 40% of cases, up from 22% in 2022.
“Despite widespread economic worries going into 2023, there’s reason for B2B technology providers to be optimistic,” said Tsai. “Even as many businesses reduce discretionary spending to weather a likely recession, we anticipate future growth in corporate IT budgets.
“This prioritization of IT spending represents a continuation of modernization efforts kick started during the pandemic.”
Over the last few uncertain years, corporate decision makers have seen first-hand the benefits of IT investments, he added. These “often pay for themselves by improving processes, enhancing resilience, or enhancing workplace productivity.”
The report reveals half of organizations are taking precautionary measures to prepare for an economic slowdown in 2023. The top strategy employed will be reductions in non-essential spending — but these cuts won’t necessarily be related to technology.
Compared to SMBs, enterprises are twice more likely to close offices or stores and reduce software licenses/seats. Both enterprise and midsize organizations are twice as more likely to implement a reduction in force than small businesses. SMBs conversely are more likely to focus on setting their customers up for success in the event of a recession.
Despite this widespread economic uncertainty, vendors will continue to see big opportunities for growth.
Fifty-one percent of organizations plan to increase IT budgets in 2023. This is versus only 6% that plan to cut back spending. This indicates that businesses will continue to invest in IT even as many prepare for an economic downturn. Enterprises are even more likely: 61% expect to increase the size of their IT budgets in 2023.
The survey data forecasts a 13% year-over-year increase in B2B tech spending in North America and Europe.
A contributing factor to planned spending increases is a bigger priority on IT projects, even with a recession looming. Throughout the pandemic technology has enabled employee productivity amid great change. As a result, business leaders’ perceptions of the value of technology have shifted from a “cost center,” to a facilitator of productivity and growth.
Midsize (53%) and enterprise (49%) businesses are roughly twice as likely to increase tech budgets due to increased priority on IT, compared to small businesses (27%). While not the primary driving factor, inflation will be a factor in 40% of 2023 tech budget increases, vs. 22% in 2022.
Other data points indicate optimism among technology vendors. The IT services vertical is most likely to increase their own tech budgets, as well as most likely to expect YoY revenue growth in 2023, compared to other industries.
Companies are exploring new, long-term working environments as trends implemented in the pandemic continue to evolve. Among those permitting remote work in recent years, 85% have asked employees to return to physical offices. This was 44.4% for some workers versus 40.1% of all workers.
Organizations will look to right-size their environments to support their employees wherever they might be. This will likely see a rebalancing of spending across hardware, software, cloud, and managed services.
While firms are turning to managed services, cloud spending plans have fallen back to 23% of planned overall IT budgets in 2023. This is compared to 26% in 2022, but still up slightly from 22% in 2020. The top three areas of planned spending within the cloud category will remain productivity solutions, online backup and restore, and business support applications.
Laptops and desktops still account for the biggest portion of hardware budgets in 2023. However, end user device spending will take a slight hit from the elevated levels seen during the pandemic.
The largest share of 2023 IT software budgets will go towards security software – an increase mirrored in managed security services. This will narrowly rise above productivity software, which is historically on top.
Elsewhere, many emerging technology plans will forge ahead in 2023. For example, adoption plans have grown significantly YoY for newer technologies such as 5G, edge computing, serverless computing, 3D printing, VR, and blockchain. Large companies will be significantly more likely to adopt emerging technologies than smaller businesses.
In 2023, businesses expect pandemic-induced challenges to persist. For example, roughly half of businesses expect to grapple with supply chain disruptions and increased product costs.
At the same time, some issues are expected to clear up. In 2023, product shipping times and product availability are expected to improve slightly. Additionally, fewer organizations expect to face challenges around remote work, perhaps due to process refinement or the expectation of workers returning to physical offices.
While IT departments are much more likely to grow than shrink in 2023, fewer are hiring than last year. Thirty-one percent of IT departments plan to hire additional tech staff in 2023, compared to 40% in 2022. On an individual level, 46% of IT pros believe their salaries will keep pace with the rising cost of living.
In 2023, businesses expect pandemic-induced challenges to persist. For example, roughly half of businesses expect to grapple with supply chain disruptions and increased product costs.
At the same time, some issues are expected to clear up. In 2023, product shipping times and product availability are expected to improve slightly. Additionally, fewer organizations expect to face challenges around remote work, perhaps due to process refinement or the expectation of workers returning to physical offices.
While IT departments are much more likely to grow than shrink in 2023, fewer are hiring than last year. Thirty-one percent of IT departments plan to hire additional tech staff in 2023, compared to 40% in 2022. On an individual level, 46% of IT pros believe their salaries will keep pace with the rising cost of living.
Managed service providers (MSPs) have reason to be optimistic as tech spending remains strong going into 2023.
The Spiceworks Ziff Davis (SWZD) 2023 State of IT report explores IT budget plans and tech trends. Despite widespread recession fears, it shows tech spending in North America and Europe is on course to grow by 13% year-over-year (YoY).
Spiceworks’ Peter Tsai
Additionally, Peter Tsai, head of technology insights at SWZD, said businesses will “shift more of their budgets towards managed services.”
Firms will look to managed services to maintain and optimize technology stacks amid difficulties in hiring IT talent. “Expected spending on managed services will rise to 18% of total IT budgets in 2023, up from 15% before the pandemic,” he explained.
The largest share goes to managed business applications, managed security, managed hosting, and managed hardware support and maintenance.
“This shift is good news for MSPs,” said Tsai. “Especially those with offerings in high-growth areas such as managed security services.”
Firms with managed IT services budget increased from 8% in 2021 to an expected 11% in 2023. Budget for managed business applications grew from 9% in 2021 vs 11% in 2023.
While 83% of businesses are concerned about a recession in 2023, 51% plan to increase their overall IT budgets in 2023. This is compared to a narrow 6% that plan to reduce their tech spend.
The report highlights the need to update infrastructure and increased priority on IT projects as primary drivers for budget increases.
Click on the slideshow above to discover more findings on future B2B tech adoption and tech spending plans.
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