Defying Economics: IT Budgets Expected To Rise in 2024 Amid Recession Preparations
Threading a growth path characterized by caution — that’s the motto of organizations when it comes to IT spending in 2024.
- According to The State of IT 2024 study, 84% of organizations are concerned about the onset of an economic recession and have thus made plans to tackle it.
- Yet, 66% of companies plan to increase technology investments in 2024.
- What is organizations’ rationale behind expecting to hike IT budgets amid recession fears, and where do they plan to spend the most? Read on to find out.
Threading a growth path characterized by caution — that’s the motto of organizations when it comes to IT spending in 2024. According to Spiceworks and Aberdeen Strategy & Research’s The State of IT 2024 study, 84% of organizations are concerned about the onset of an economic recession and have thus made plans to tackle it. And for good reason.
The cascading effect of an unprecedented healthcare crisis, constricted spending, a rebound, geopolitical conflicts, soaring inflation, and an energy crisis has resulted in ebbs and flows in the global economy. With no end in sight for the Ukraine-Russia war and the 2024 presidential election in the U.S. on the horizon, it is unlikely that the state of global affairs and economy would get a sigh of relief.
In its June 2023 report, the Organisation for Economic Co-operation and Development (OECD) noted that “global growth has stabilized, but the improvement is fragile,” thanks to underlying inflationary pressures.
Here’s what S&P Global said in its Global Economic Outlook Q3 2023 report: “Labor markets are still tight, and core inflation is stubbornly high, although headline inflation has eased. Major central banks have more work to do and are now signaling that policy rates will stay higher for longer. Moreover, financial markets agree, and rate cut expectations this year are now off the table. Higher for longer will stay the hand of emerging market central banks that want to cut rates.”
“Our revised GDP forecasts generally show faster growth in 2023 and a slower pace in 2024,” adding that the signs of recession have eased off. However, there is still the possibility of an upcoming slowdown, which would be shallow and spread over the long term.
Businesses know this and are acting accordingly.
Key Takeaways From The State of IT 2024 Report
IT spending/budgets to grow despite undertaking recession countermeasures
81% of Spiceworks and Aberdeen’s The State of IT study respondents have made business process changes anticipating a recession. 74% have actuated cost-cutting measures by changing tech purchasing behaviors, while 43% have slowed hiring or axed their workforce through layoffs.
Still, there is optimism in the air, particularly in IT departments, where investments in technology have been undeniably beneficial. As such, two-thirds (66%) of companies plan to increase technology investments in 2024. Moreover, expect IT spending to grow by 6% year-on-year (YoY) overall, while the average IT budget could grow by a median of 5%.
Similarly, 41% of organizations said they would increase the size of internal IT staff compared to 31% last year, indicating a growth in IT hiring.
IT Budgets Change 2023 vs. 2024
Source: Spiceworks and Aberdeen’s State of IT 2024
Just 4% of respondent organizations plan to decrease IT spending.
See More: Tech Spending to Boom in 2022: Cloud, Security, Hardware to Drive 26% Growth in IT Budgets
IT budgets will grow in 2024 because…
A tight monetary policy adopted by central banks worldwide to curb inflation and rising costs through higher interest rates would mean lower investments. However, responses to The State of It 2024 suggest that the technology sector is doubling down on IT budgets and investments, not despite inflation, but because of it.
Countering inflation is the fourth biggest factor behind organizations hiking IT budgets, the first three being the need to replace outdated infrastructure (for instance, Windows Server 2012 will reach end of support on October 12, 2023), prioritizing IT projects, and cybersecurity concerns.
Factors Behind Increase in IT Budgets
Source: The Stae of IT 2024 Report
Are companies adopting emerging technologies?
Yes. Despite a cutback on non-essential spending.
The top five emerging technologies that companies are currently adopting are IT automation (45%), 5G (42%), Internet of Things (IoT, 41%), gigabit WiFi networking (41%), and virtual desktop infrastructure (35%). For those wondering where artificial intelligence is, it is seeing the tenth most adoption (25%) of emerging technologies by respondent organizations.
“Looking forward, adoption plans are strong across all technologies we’re currently tracking. Notably, businesses anticipate that they will double the adoption of the following within the next two years: Kubernetes, edge computing, converged infrastructure, serverless computing, and artificial intelligence (AI),” the report reads.
Why are companies seeking to adopt new technologies?
Jim Rapoza, VP and principal analyst at Aberdeen, said, “45% of businesses that modernized and adopted new technologies reported improved ROI for their IT investments. This is also a driver in the rise in IT hiring, as businesses work to reduce challenges in lack of expertise and resources.”
Besides, data indicates that organizations expect to face challenges due to IT skills shortages. As much as 63% of senior tech leaders (director and above) attested to the difficulty in hiring skilled IT talent. The number increased from 58% last year.
What will organizations spend their IT budgets on?
Though IT labor (15%) is one of the top three areas where IT budgets receive the highest allocation of funds, respondents say IT budget allocation for software and hardware (20%) is the highest. Hardware comprises laptops, desktops, servers, and networking, while software includes security, productivity, operating systems, databases, and virtualization.
IT Budget Allocations 2024
Source: The State of IT 2024 Report
Responses indicated that companies with less than 100 employees would spend more on hardware (24%) compared to mid-size companies with 100-999 employees (19%) and enterprises (16%). Meanwhile, larger companies are expected to spend more on managed services, facilities, and power.
Is your organization planning to increase IT spending? Share with us on LinkedIn, X (Twitter), or Facebook. We’d love to hear from you!
Image source: Shutterstock
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