IT Spending Rising Despite Recession Fears

February, 2023

Despite most of our survey respondents agreeing that the economy will be worse in 2023 than in 2022, they also report IT spending increases that are broad and strong. How can this be? It is because business leaders no longer see IT as a cost center but as a strategic driver of growth. As a result, they are giving their IT departments greater resources to help plan for a possible coming recession rather than asking them to tighten their belts.

Figure 3 from our full study, Worldwide IT Spending and Staffing Outlook 2023, shows the expected median IT operational budget growth for the worldwide sample is the highest it has been in the cloud era (tied with last year). At the median, IT operational budgets are projected to rise 5.0% in 2023.

Worldwide IT Spending RB 1030x687 - IT Spending Rising Despite Recession Fears

As an IT manager at a medical diagnostics firm put it in our survey, “There are tough times ahead. Even so, investments in security, resource planning, and digital transformation cannot be postponed.” Or, as this CTO of a major beverage company stated, “The main focus is to create new business capability through digitalization and building a strong foundation.” Or finally, as the CIO for a commercial real estate firm said, “The outlook of our budget is reasonable given the current economic environment. We are doing our best to be well positioned for a downturn if one occurs and have focused on retaining talent.”

IT organizations are also expecting to increase hiring with modest head count increases for the year. In recent years, even in good economic times, IT department head counts have been flat due to the influence of cloud, SaaS, and automation. So even modest growth signals a commitment to continuing digital transformation.

“Cybersecurity and digital transformation are the two largest priorities in hiring,” said David Wagner, senior research director at Avasant, based in Los Angeles. “Talent shortages, along with rising salaries, are going to make recruiting, and especially retention, a major priority for 2023.”

The challenge for IT in 2023 is set, and it is a difficult one—despite rising costs and a shortage of talent, deliver value for the organization in tough economic times. But before we get too pessimistic, we should remember that CIOs are being given more resources to deal with their issues than in past recessions. During the 2008 recession, we saw IT budgets slashed. In the recent downturn caused by COVID lockdowns, companies tried very hard to hold off those types of cuts as they went through changes, including working from home and creating digital business plans. This recession, if it comes, will be much less like 2008 and more like 2020. IT is definitely seen as part of the solution to a recession rather than part of the problem.

Our Worldwide IT Spending and Staffing Outlook 2023 assesses IT operational and capital spending plans for 2023, 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 report on this subject, Worldwide IT Spending and Staffing Outlook 2023. The full report is available at no charge for subscribers, or it may be purchased by non-clients directly from our website (click for pricing).