Organizations Plan Increase in IT Spending as Economic Headwinds Mount

Despite the growing economic uncertainty — exacerbated most recently by the fallout stemming from the collapse of Silicon Valley Bank — 62% of IT executives say they have plans to increase IT spending this year.

Omdia's 2023 IT Enterprise Insights survey of more than 6,400 senior IT executives across 56 countries revealed the top priorities for enterprises, which include:

Omdia-priorities

The key strategic business-enabling areas include increasing revenue and budget growth, increasing operating efficiency, and improving customer experience. Organizations are also focused on reducing IT operating expenditures.

Enterprise internet of things (IoT), artificial intelligence and machine learning, and 5G and edge technology were among the most targeted digital-enabling technologies.

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Cem Nurkan, research director of enterprise IT at Omdia, said it's no surprise that IT budgets are increasing significantly.

"We believe that for most enterprises, the pandemic was an eye-opener," he said. "They realized how thoroughly technology pervades the enterprise."

Probably a greater surprise to non-IT executives was how quickly suppliers, and particularly customers, adopted digital practices and lifestyles, he said.

Related:IT Leaders' Tech Predictions for 2023

"The focus is not only internal for IT, but they have a customer, partner, and supplier role to play in the organization," Nurkan said.

How IT Saved Businesses During the Pandemic

The COVID-19 pandemic also made it clear to businesses how technology can be a savior and add to the resilience of the organization.

"There's no doubt that IT saved companies during the lockdown and beyond," Nurkan pointed out. "But enterprises should not be blinded to the opportunities presented by digitalization of their customers and ecosystem."

From his perspective, the safe route would be to strengthen internal processes that were changed by the pandemic, but the strategic route would be to focus the IT lens outward.

"We track digital transformation over the years and have found that only 13% of enterprises' digital transformation initiatives are customer-facing," he explained. "While about 80% of enterprise IT budgets are about operations and maintenance, more effort should go into IT discretionary spend in the customer space."

If, as the Omdia survey found, the top priority for businesses is to increase revenue, then a truism applies: There is only one source of revenue — the customer.

Related:IT Burnout, Budget Cuts Concern Tech Leaders Heading into 2023

"Not only should IT strategy focus on customers, but they should also focus on expanding markets — globally, new markets and new customer profiles," Nurkan said. "Increasing revenues and reducing cost is a given, but we often see organizations skimping on making sound, future-proof investments to save a few dollars only to have to replace them at great expense within a short period of time."

Should COEs Replace IT Departments?

Some analysts in Omdia would argue that the IT department should not exist, but rather, there should be a center of excellence (COE) providing services and skills to cross-functional teams focused on value streams, he said.

"Then IT executives would argue for a budget that covers the entire organization's digital efforts," he said. "Similarly, we should be shortening budget and planning timeframes. For many initiatives, one-year budgets may not be practical in a fast-changing environment."

Nurkan noted that with several banks in the U.S. collapsing, the Ukraine conflict stretching on, natural disasters and abnormal climate patterns causing catastrophes, potential for a downturn, the threat of more unknown diseases, and the blistering pace of technological change, there is no dearth of disruptions.

"If anything, the pandemic proved that those organizations that had technology firmly embedded in their business were the ones that were fastest to pivot successfully," he said.

Nurkan advises businesses that want to survive the next decade or two to make a point to create a technology roadmap for the future and allocate budgets to develop a robust technology backbone capable of weathering the major challenges that are yet to come.

"This requires foresight, the ability to plan for various scenarios, and to effectively communicate the importance of technology in each scenario to get buy-in from across the board," he said.