As we covered in our post last week – IT budgets are a big deal right now among businesses. Many businesses are still navigating the remote/hybrid/WFH situation with their employees, and as such, sorting out an IT budget can be next to impossible.
In addition to changing attitudes around work and the office, stocks are going up, while unemployment is going down, and inflation is going up – and all of this, happening concurrently with rate hikes not seen for years!
With the way that things are going, it can feel impossible to budget anything let alone the exponentially-evolving world of IT and IT infrastructure. When business owners find themselves lacking in direction, it’s usually helpful to stop, take a look around, and see what the situation is – and how others are reacting to it.
You don’t want to follow the herd, but looking to your competitors for a way to optimize your business is a necessity for any business owner that wants to survive in the choppy waters of the 2023 economy.
With 40-year high inflation that seems to only be increasing, it would make sense to assume a grim outlook for IT and B2B tech spending in 2023, but actually, you might be surprised by the reality.
In this article, we’ll take a look at the most recent outlook for what companies in various industries are spending on their IT budgets in 2023. Our main point of reference will be Spiceworks Ziff-Davis’ (SWZD) excellent 2023 State of IT Report.
Budgets Are Still Growing
Obviously people are still worried about a recession, with the recent FOMC meeting labeled a “hawkish pause” by many in the media. As you might expect, 83% of companies surveyed by SWZD voiced concerns about a potential economic downturn.
But here’s the kicker – IT budgets are still expected to increase in 2024, even with a possible recession looming. 51% of the surveyed organizations plan to ramp up their IT spending in the upcoming year by 13% a year!
Only a teeny-tiny 6% of respondents were planning on making cuts to their IT budget, while a significant portion reported seeking ways to optimize their expenditures, rather than outright make cuts.
This suggests that managed IT providers or other outsourced options may become a bigger piece of a company’s IT framework, as cost savings are essentially the main benefit of an MSP.
Why Are IT Budgets Growing?
Well, the reality is that IT is becoming more and more critical to businesses of all stripes, every day. The cold reality is that as our need for a robust digital ecosystem grows, IT budgets will continue growing across industries and national borders.
When looking at how IT budgets break down, there are really only a few things that drive the need for businesses to spend more on their IT. The main drivers right now are:
- Infrastructure investment
- As we rely more on tech, the need for continued investment in IT infrastructure will only continue to grow.
- Perhaps surprisingly, many of the respondents interviewed said that they expect their organization to grow. A larger organization requires more IT infrastructure and investment.
- It feels like everybody is getting hacked these days. As organizations grow, they also make themselves simultaneously more valuable – and more vulnerable. Companies of all sizes are paying more to protect their data. Check out our article on MSSPs for more!
- IT’s importance
- As previously mentioned, we simply have more need for IT in 2023 than ever before. Naturally, more important departments require more resources.
How Are Companies Saving Money on IT in 2023?
Here are some of the main ways that companies are going to save money this year, according to SWZD’s report.
– Reducing non-essential spending
– Vendor/contract evaluation
– Infrastructure evaluation and adjustments
– Freezing hiring
– Holding off on tech purchases
– Consolidating old or redundant tech
– Cutting the amount of licenses or seats
– Using cheaper versions/tools/etc
In short, companies are doing everything and anything they can do to reduce their IT costs as we hurtle toward 2024. You know the drill: looking for redundancies, retiring old hardware, putting off upgrades, reducing the workforce, and – most notably – outsourcing parts or the entirety of their IT operations to an IT partner.
The Shift Toward Managed Service Providers
One of the biggest takeaways from this report is an obvious shift that’s occurring. It’s something we see quite often, as, let’s be honest, benefactors of this change: companies are shifting much of their budget over to managed IT services.
SWZD found that managed IT services are now 18% of companies’ budgets, up from 15% in 2020. We’ve seen a massive shift in how companies operate since the COVID-19 pandemic, with many going remote. Companies saw the cost savings from shifting their IT infrastructure to online or by outsourcing their IT needs to a managed service provider.
That trend looks to continue as companies look to save money on their IT operations. A lot of money is being pulled away from paying for things like cloud services or SaaS in favor of just simply handing off entire IT programs or pieces of infrastructure to a third party.
In 2023, with IT costs increasing and inflation screaming towards new records – it’s worth exploring if offloading the time, energy, and cost of handling your IT in-house could be worth it to you.
Check out our article on the benefits of managed IT services for more!