Global Events Raining on Positive IT Budget Parade

March, 2022

Going into 2022, we seemed poised for a broad, strong recovery. IT budget increases were large. Staffing levels were increasing. And growth could be found across nearly all sectors.

But, like every year it seems, events are conspiring to change that outlook. Since we closed our survey in early February 2022, geopolitical events—specifically war between Russia and Ukraine—threaten to disrupt this optimistic outlook. The price of oil and gas has increased and, if the trend continues, could push the world into a recession. At the time of this writing, negotiations persist to limit the impact on oil prices, but it is too early to tell the final effects.

Nonetheless, Figure 3 from our full study, Worldwide IT Spending and Staffing Outlook 2022, shows the expected median IT operational budget growth for the worldwide sample is the highest it has been in the cloud era. At the median, IT operational budgets are projected to rise 5.0% in 2022. Despite the potentially dire news limiting the economic expansion there is still plenty of reason to be optimistic.

Worldwide spedn graph 1 1030x687 - Global Events Raining on Positive IT Budget Parade

Digital transformation initiatives have allowed many IT organizations to quickly shift to a world where most of us live, work, buy, and sell remotely. Most organizations with a digital presence are thriving. The first-mover digital advantage is over. Now, the real work begins as all competitors recognize that many changes to customer behavior during the pandemic might be permanent. Digital transformation is not enough; smart digital transformation will be required. Omnichannel customer interaction is a must. Customers expect experience-driven, hyper-personalized, and data-driven business models. And increasingly they will expect it in the growing metaverse. In other words, digital transformation has just begun.

“For years, companies could simply migrate additional workload to the cloud and use the savings for new innovations,” said David Wagner, senior director of research for Avasant Research. “But with that low-hanging fruit gone, we expect companies to continue to invest heavily in IT for top-line growth, not just operational efficiency.”

Even if economic growth decelerates because of inflation or the conflict in Ukraine, we would not expect IT spending to slow down too much. In the midst of the worst of the pandemic, companies that could, continued to invest in IT as the way forward in the digital economy. We do not expect anything different this time.

However, despite the optimism, we did detect that CIOs might be feeling the pressure. The head of innovation at a large REIT put it this way in our survey, “I’m feeling great that we have a bigger budget, but the level of accountability and scrutiny has also increased. This comes with more anxiety to not go over on projects.”

Another VP of  IT for a different REIT seconded that feeling, “The business leadership has been a big supporter of IT and looks to IT to lead business transformation. This support has translated into increased funding, but I am ever cognizant that we have to deliver on the benefits of digital transformation to attract continued funding in future years.”

So as we move through 2022, IT leaders are increasingly looked upon to lead companies into the future. They are being given strong budget increases, but with inflation and economic turmoil, increases may not be enough. In other words, CIOs have been given a seat at the table right when that seat is getting pretty hot.

Abraham Lincoln is often erroneously quoted as having said, “The best way to predict the future is to create it.” Fake news or not, it is a good description of 2022. CIOs will be called on to create the future this year. Our outlook for 2022 is positive when it comes to IT spending and staffing. Even with the specter of inflation and global conflict, we have reached a time where budgets are growing, and enterprises are looking to IT to lead the way. With that comes the pressure to succeed.  But to quote another internet favorite, “Pressure makes diamonds.”

This year, our Worldwide IT Spending and Staffing Outlook 2022, assesses IT operational and capital spending plans for 2022, priorities for IT spending and investment, and plans for hiring, outsourcing, and pay raises for IT organizations worldwide.

This Research Byte is a brief overview of our study, Worldwide IT Spending and Staffing Outlook 2022. The full report is available at no charge for Computer Economics client or may be purchased directly from our website (click for pricing).