“This is probably the new normal … the pandemic drove home the lesson that IT was a strategic necessity and that a digital strategy was imperative in all sectors. As a result, IT spending did not decline during the lockdowns – instead, it went up.”
So says Computer Economics in its 33rd annual IT Spending & Staffing Benchmarks report for 2022/2023. The research company surveyed 225 North America-based IT organisations in the first half of 2022. Many had global operations and the sample spanned public and private sector organisations of all sizes.
The final report provides gathers IT spending and staffing data, providing benchmarks for organisations in 29 sectors and subsectors.
Top-line findings: IT departments are in good shape
“Our top-line findings show that, for the most part, IT departments are in a strong but somewhat new position. The outlook for 2022 is, admittedly, a bit of an enigma.”
It’s no surprise to say that the global economy is in the midst of upheaval and that the geopolitical situation is volatile. Decade-old predictions about the emergence of a ‘VUCA’ (volatile, uncertain, complex and ambiguous) environment have come true.
Supply chains are fragile; inflation is a growing concern and the war in Ukraine has put pressure on energy costs and food supplies. The report also notes increasing concerns about recession, inflation and digital economic warfare: “Bubbles in non-fungible tokens, cryptocurrencies, and possibly real estate show a fragile market.”
How is it, then, that IT budgets have continued to grow (by a median of 5%), with 80% of companies planning to increase their spending, up from 75% last year? Further, many companies plan to increase their IT headcount, despite rising labour costs.
IT has become a strategic asset
The short answer is that digital transformation has made IT strategic, and CIOs want to show what they can do. The report notes that:
“The IT department of the present is more resilient, flexible, innovative, and focused on the business than in 2019, before the pandemic and the subsequent crises we currently face. Around 39% of companies report that they now have at least half of their applications in the cloud, up from 29% in 2019. Cloud infrastructure has gone from an average of 2.3% of the total IT operational budget last year (we did not measure this in 2019) to 5.7% this year. Data analytics, digital transformation, and systems and data integration follow right behind cloud apps and cloud infrastructure as top categories of new spending initiatives.”
In other words, the pandemic showed that IT is essential to every business, from basic functions, such as payroll, payments and other transactions, to advanced functions such as analytics, business intelligence and ERP (enterprise resource planning).
The findings tell the tale
We can’t go over the report’s findings in detail, but below are its 14 findings; taken together, they paint a clear picture of how businesses are aligning their IT functions with their core business.
- IT operational spending growth is strongest in a decade
- IT operational spending growth expected across the board
- Broad growth across all sizes
- Most CIOs have enough budget
- IT spending as percentage of revenue ticks up
- Per-user spending also increases
- Construction/trade services sector leads in IT spending growth
- Capital budgets no longer a priority
- Capital budgets drop sharply as a percentage of IT spending
- No surprise – cloud tops spending priorities
- More companies reaching maximum cloud
- Data centres riding off into the sunset
- IT head count expected to grow
- The ‘big quit’ came to IT
What this means for you
How is all this data relevant to your business? Simple: if you’re not investing in IT and keeping your team and capabilities up to the mark, you risk falling behind in staffing, innovation and other business-critical capabilities.
ERP systems play a critical role for every business – large or small – as they allow you to make better strategic and operational decisions, help you become more secure and resilient, and position you to be agile, innovative and responsive to new market opportunities.
At Eagle360, we help organisations in all industries to become fast and flexible. If you’d like to learn more about how we can assist, please don’t hesitate to contact us today.