Cautious Pessimism: IT Budgets in Inflationary Times
In spite of 40-year record high inflation that all consumers are feeling at the checkout lines and gas pumps, IT spending intentions have not yet seen a dramatic turn for the worse. According to July data from research firm Enterprise Technology Research, CIO spending intentions are slightly down from last year, but still represent a 6-7% increase over last year’s budgets. ETR is quick to point out that a portion of that increase can be related to vendor price increases, but projects continue to be funded.
Another firm, Sales Pulse Research, who surveys end users, channel partners, and vendors, agrees with ETRs conclusions. They also reinforce that most companies have a cautious outlook at this point and will be quick to make budget changes if signs of a weaker second half accelerate.
In July, research firm Gartner reforecast 2022 spending at $4.5T, with year-over-year growth at 3%. Data Center Systems spending represented the highest growth at 11.1%, while device spending was weakest at -5%.
Budget Course Corrections
As businesses look out to the second half of 2022, there are options available to have a near-immediate impact on the budget.
Evaluate discretionary cloud spend
Cloud services are easy to turn on and, if left unchecked, consumption can escalate rapidly. Make sure you’ve categorized your cloud spend according to business criticality and are scrutinizing more discretionary consumption. For example,
Leverage services to fill the talent gap
Gartner expects the IT talent shortage to extend through 2022 into late 2023, so the ability to attract, hire, and retain top skills will continue to be expensive and challenging. As CIO preferences shift from ownership to service models, the opportunity to leverage the bench of service provider partners can help stop-gap critical needs, as well as address less-strategic requirements while full-time employees focus on strategic, business-critical projects.
Consolidate non-strategic spending
The “one of everything” model for IT can introduce best-of-breed capabilities, but it can also lead to over-spending. Vendor consolidation, particularly in less-strategic categories like hardware maintenance, can free up significant budget dollars for savings or funding business-critical projects.
Conclusion
At this point, it’s unclear when inflation pressures will subside. In the meantime, it’s wise to maintain a cautious outlook and capitalize on the skills of your services partners to help rationalize budgets, fill skills gaps, and continue vital modernization efforts.
