The IT spending and staffing outlook in Europe for 2023 is positive, but CIOs are being asked to be especially careful to make sure their investments count. For over a year, European companies have dealt with inflation, poor economic growth in the region, brittle supply chains, and a war on their doorsteps. By now, we would have expected more companies in Europe to be cautiously preserving cash, preparing for a recession. And yet, for the most part, businesses are not cutting IT budgets.
As shown in Figure 1-1 from the free executive summary of our European IT Spending and Staffing Benchmarks 2023/2024 study, IT budgets are increasing by 5.0% at the median. This is the highest increase we have seen in the four years of the study. Of course, inflation in the eurozone is at 5.3% currently, which means these increases are only covering cost increases.
Enterprises are now counting on IT to pick up the slack just as it did during the COVID-19 lockdowns. We see 71% of European companies in our survey increasing their IT budgets. A very strong 58% of European companies intend to grow their IT head counts as well.
Of course, it is not all sunshine and roses. Each year we ask CIOs what is the more important factor in IT spending—lowering costs or increasing service. Last year, 65% of CIOs said increasing service was more important or much more important. Only 7% said reducing cost was more important. This year, 36% say improving service is more important or much more important and 25% say reducing cost is more important or much more important. It is clear that IT leaders are being asked to pay more attention to cost management.
But still, in previous recessions, IT organizations have typically been asked to cut budgets and hold off important spending in order to preserve cash. Certainly, it was rare for companies to increase IT staff in the middle of economic downturns. So, the fact that IT budgets and hiring are increasing at a healthy pace says something about the importance of IT as a strategic growth center rather than merely a cost.
In Europe, IT leaders are being asked to perform a balancing act—transform the enterprise while keeping one eye on the budget. This type of “zero-cost transformation,” as Avasant calls it, is possible. Investing in new technologies that make the enterprise more productive and then investing those savings, in turn, toward more transformation, is possible. In fact, a record 54% of our respondents said that their budgets were adequate or more than adequate to meet their goals this year.
“IT leaders are increasingly being called on to be business leaders,” said David Wagner, senior research director at Computer Economics, a service of Avasant Research, based in Los Angeles. “It is up to CIOs to show the art of the possible.”
To drive this point home, we are seeing increased investment in digital transformation, automation, analytics, and system/data integration—all prerequisites for everything previously mentioned.
Our European IT Spending and Staffing Benchmarks 2023/2024 study is based on a detailed survey of more than 200 IT executives in Europe on their IT spending and staffing plans for 2023/2024. The study provides IT spending and staffing benchmarks for small, midsize, and large organizations and for 20 sectors and subsectors. These include six new subsectors, namely life sciences, chemicals, high-tech, professional services, online retail, and brick-and-mortar retail. A description of the study’s metrics, design, demographics, and methodology can be found in the free executive summary.
This Research Byte is a brief overview of the findings in our report, European IT Spending and Staffing Benchmarks 2023/2024. The full 25-chapter report is available at no charge for Avasant Research clients. Individual chapters may be purchased by non-clients directly from our website (click for pricing).