Coronavirus Impact on IT Budgets Still Coming

July, 2020

Benchmarking IT spending and staffing is a complicated task in the best of economic conditions. Benchmarking in the middle of a global pandemic and recession is even more difficult, but also more important. As we prepare the launch of the 31st edition of our annual IT Spending and Staffing Benchmarks report, this is the challenge.

Because our benchmarks adjust based on levels of business activity such as revenue or staff size, they can still be applied in times of economic decline. Nevertheless, many IT leaders want to understand how the pandemic and recession are affecting IT budgets. To meet this need, in the latter part of our 2020 survey period, we conducted supplemental research to determine the impact of the pandemic on IT budgets at the time of publishing.

Currently, the answer might be a bit surprising. As of May 2020, most companies had not changed their IT operational budgets. And those that have cut their budgets have not made deep reductions. A small but noteworthy group is even increasing IT spending, mostly to support the increase in remote workers. Most companies are in wait-and-see mode.

As seen in Figure 1 from our full report, The Impact of COVID-19 on IT Budgets in 2020, only 30% of respondents reported that they have already cut their IT operational budgets. Another 57% have left budgets unchanged. Around 13% are increasing their budgets to in response to the pandemic.

Fig1ImpactofCOVID19 1030x687 - Coronavirus Impact on IT Budgets Still Coming

Many organizations appear to be better prepared for this recession than the last one. The cloud and digital transformation initiatives have allowed many IT organizations to quickly shift to a world where we live, work, buy, and sell remotely.

“In addition to allowing remote work, digital transformation has put IT departments in a better place to maintain service levels while spending less,” said David Wagner, senior research director at Computer Economics, a service of Avasant Research, based in Los Angeles. “From what our survey respondents are telling us, short-term initiatives to support remote work are mostly offsetting the need to cut IT spending in response to declining business conditions. Many are telling us to check back in a few months”

If the current pandemic continues for some time, as expected, the economic impact will likely continue. And more companies will be forced to reduce IT budgets and staff. This is not necessarily the end of the coronavirus impact. In fact, we’ve likely yet to see the true depth of crisis. However, it is worth noting that, so far, many IT organizations are able to navigate through the early uncertainty. We will continue to monitor the situation with additional surveys and update our analysis as necessary.

The full report outlines how the pandemic is affecting IT operational budgets, IT capital budgets, IT staff head counts, compensation, outsourcing, budgets for new projects, and the use of the public cloud. We also report how long IT leaders expect it will take for their budgets to recover from the recession. In addition, we forecast expected IT spending cuts by industry for all of 2020, along with our recommendations for IT leaders in managing their spending through the crisis.

This Research Byte is based on our report on this subject, The Impact of COVID-19 on IT Budgets in 2020. The full report is available at no charge for Avasant Research subscribers, or it may be purchased by non-subscribers directly from our website (click for pricing).