In our annual report on the IT spending and staffing outlook for the new year, we find that IT leaders worldwide have a generally positive outlook for the global economy. Nevertheless, IT budgets appear to be growing only modestly. The cloud transition is well underway, and organizations are realizing the economic benefits. This may be hindering budget growth, as IT organizations are able to fund new initiatives, in part, through savings in ongoing support.
Despite the generally positive outlook, we also find that IT leaders are showing more nervousness than in recent years. Widespread fears of a global trade war triggering a possible recession also may be putting a damper on growth.
Figure 6 from the full study, Worldwide IT Spending and Staffing Outlook for 2019, shows the expected median IT operational budget growth worldwide, as well as for each world region.
The U.S./Canadian region, along with EMEA, expects to see 3.0% growth, which is the same as the composite sample. Latin America and APAC lag slightly behind with respondents from those regions reporting 2.0% and 1.0% operating budget increases, respectively. This represent a healthy, if unspectacular, increase. And it is the type of number that we can probably consider as the “new normal” for economically good years, at least as the cloud transition continues.
“Typically, before the cloud transition, companies would need to increase IT budgets in order to grow,” said David Wagner, vice president of research for the Irvine, Calif.-based research firm Computer Economics. “However, it is no longer necessary to invest in hardware and staffing (two of the biggest line items in an IT budget) in order to increase capacity. The cloud, as well as efficiency from automation and other new technologies, makes it possible for companies to increase capabilities without increasing infrastructure burden.”
A look at where organizations plan to spend their new dollars provides more insight into current trends. A net 67.2% of IT organizations plan to increase spending on business applications, while in our worldwide sample, only a net of 3.8% of companies plan increases in data center spending.
Meanwhile, in the U.S. and Canada, more companies are planning to decrease spending on data center infrastructure than plan to increase it. A net of 8.9% plan to decrease data center spending. This is the second year running that U.S. and Canadian companies plan to decrease such spending, a sure sign of transition to technologies such as SaaS and public cloud infrastructure that shift the infrastructure burden away from the in-house data center.
Another issue for some companies is the economy. Fears of a possible recession, as well as the U.S.-China trade war spurred by President Donald Trump’s tariffs, have some companies uncertain in the coming year. Although no respondent in our survey used the “R word” when discussing limits on their budget, several said they were uncertain about where the economy was headed. One vice president of IT at a U.S. manufacturing firm wrote, “The 2019 budget process has had more scrutiny around it than any other year.”
Regardless of whether the economic outlook or the cloud is driving the changes to the budget, it seems like most companies have a similar response. An IT manager from an agricultural company may have summed up 2019 best when he commented in our survey, “The theme for 2019: operational efficiency.”
Whether the economy is good or bad or technology is stable or dynamic, that’s a smart solution that never goes out of style.
In this annual outlook study, we provide guidance for IT executives as they firm up their plans for 2019. This year, our report assesses IT operational and capital spending plans for 2019, priorities for IT spending and investment, and plans for hiring, outsourcing, and pay raises for IT organizations worldwide and in the U.S. and Canada.
This Research Byte is a brief overview of our study, Worldwide IT Spending and Staffing Outlook for 2019. The full report is available at no charge for Computer Economics client or may be purchased directly from our website (click for pricing).