The State of IT Report 2023
September 28, 2022
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Although 83% of businesses are concerned about a recession in 2023, B2B tech marketers can look forward to growth — 51% of organizations plan to increase IT budgets in 2023 vs. a narrow 6% that plan to reduce their spend, according to the 2023 State of IT report from Spiceworks Ziff Davis (SWZD).

For an in-depth understanding of how recent events and an uncertain economic outlook would impact organizational plans to invest in technology, SWZD surveyed 950+ IT professionals representing companies of various sizes in North America and Europe.

2023 State of IT Report Highlights:

■ The majority (83%) of organizations are concerned about a recession in 2023, yet most companies (58%) expect their revenues to increase year-over-year (YoY) in 2023. Only 10% expect revenues to decrease.

■ Half of organizations plan to take precautionary measures to prepare for an economic slowdown in 2023 (e.g., re-evaluating vendors or contracts, decommissioning unnecessary infrastructure, focusing on opportunities likely to prosper in a downturn, hiring slowdowns).

■ Roughly half (51%) of organizations plan to increase IT budgets in 2023, while only 6% plan to cut back on tech spending.

■ 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.

■ Managed services spending will rise to 18% of IT budgets in 2023, up from 15% in 2020.

"Despite widespread economic worries going into 2023, there's reason for B2B technology providers to be optimistic," said Peter Tsai, Head of Technology Insights, Spiceworks Ziff Davis. "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, which often pay for themselves by improving processes, enhancing resilience, or enhancing workplace productivity."

2023 Spending Trends: IT Budgets Prioritized

The report reveals 50% 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 (1-499 employees), enterprises (500+ employees) are two-times more likely to close offices or stores and reduce software licenses/seats. Both enterprise and mid-size (100-499 employees) organizations are two-times more likely to implement a reduction in force than small businesses (1-99 employees) — who conversely, are more likely to focus on setting their customers up for success in the event of a recession.

Despite this widespread economic uncertainty, tech vendors will continue to see big opportunities for growth.

For example, 51% of organizations plan to increase IT budgets in 2023 vs. only 6% that plan to cut back spending, indicating that businesses will continue to invest in IT even as many prepare for an economic downturn. Enterprises (500+ employees) are even more likely: 61% expect to increase the size of their IT budgets in 2023.

2023 State of IT survey data forecasts a 13% year-over-year increase in B2B tech spending in North America and Europe (with a median IT budget increase of 5%, at a company level).

Optimization as a Key Driver of 2023 IT Budget Growth

A large contributing factor to planned spending increases is a bigger priority on IT projects, even with a recession looming. Throughout the pandemic, tech has proved to be a worthwhile investment — organizations have seen the value in IT spending while using technology to enable 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. As businesses look to maximize efficiency during an economic slowdown, they will often leverage technology and IT to do more with less.

Mid-size (53%) and enterprise (49%) businesses are roughly two-times more likely to increase IT 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 IT 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 all other industries.

Shifts in IT Budget Allocation

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 (44.4% some workers vs. 40.1% all workers).
The transition of many workers back to in-person environments will likely influence a rebalancing of spending across hardware, software, cloud, and managed services as organizations right-size their environments to support their employees wherever they might be.

Additionally, after investing in modernization in recent years, many businesses are now turning to managed services to maintain and optimize technology stacks amid difficulties in hiring IT talent.

Spending on managed services (which can be used to service both cloud and on-prem infrastructure) rose to 18% of IT budgets in 2023, up from 15% before the pandemic. The largest share goes to managed business applications, managed security, managed hosting, and managed hardware support and maintenance.

Cloud spending plans, on the other hand, have fallen back to 23% of planned overall IT budgets in 2023, 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 although end user device spending will decrease slightly from the highly elevated levels seen during earlier phases of the pandemic.

The largest share of 2023 IT software budgets will go towards security software (an increase mirrored in managed security services), narrowly rising above productivity software, which is historically on top.

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. Continuing a trend we've observed consistently, large companies will be significantly more likely to adopt emerging technologies than smaller businesses.

New and Continued Challenges in IT

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: 31% 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.

Methodology: This Spiceworks Ziff Davis study was conducted in June 2022 by Aberdeen Strategy & Research, a division of Spiceworks Ziff Davis. The survey included 968 IT buyers from organizations across North America and Europe. Data was also collected in APAC and LATAM, which will be reported separately because it cannot be fully trended with previous waves.

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