COVID-19 is Changing IT Spending Patterns

The COVID-19 pandemic has already dealt economic chaos across many sectors. Now a new study by the Computer Economics arm of Avasant Research finds that yet more budget cuts are imminent, this time in IT spending. These cuts are predicted to be as high as 15% in some areas of healthcare, retail, transportation and higher education. Other verticals hard hit include entertainment, tourism and hospitality.

The common denominator among these sectors appears to be their dependency on personal contact. With far fewer customers pounding on their doors, many businesses are struggling to stay open. Drastic cutbacks are inevitable.

There are some winners, however, and some sectors are faring better than others. The result could be sharper focus on certain sectors – and more competition for those IT budgets.

Overall, the cuts for IT will average 5% to 11%, according to Frank Scavo, President of Computer Economics. The sectors that are likely to show the lowest drop in IT spending are energy & utilities (0% to 5%), manufacturing (4% to 7%) and the public sector (4% to 6%).

Some companies raise IT spending, most avoid tech layoffs

But it’s not all bad news. 13% of organizations are raising their IT budgets. And four out of five organizations in the survey have successfully avoided IT layoffs this year. Despite general trimming of personnel numbers and intense financial pressure, most organizations are keen to hold onto IT talent as they wrestle with the added burden of a remote workforce. With IT departments across the country scrambling to keep up with demands to instantly implement applications such as Microsoft Teams, videoconferencing and workforce management, fewer IT staff could be disastrous.

Cloud a big winner

The cloud, too, is a big winner in these unusual times. Even if companies wanted to deploy in-house hardware and systems, many can’t even gain access to their own facilities. States like California, New York, Connecticut and New Jersey, for example, have largely kept a tight lid on office access. The restrictions may be easing. But even so, the ability to work in the office can no longer be taken for granted. Hence, IT has no choice but to opt for hosted tools and software in response to executive urgency to ensure the business is functioning perfectly despite everyone now working from home.

It is clear from all this that annual IT budgets for 2020 and 2021 will be markedly different from those completed at the end of 2019. With so much invested in remote management, the cloud and work from home tools, it is difficult to see how this trend could be reversed. Those businesses that have been reluctant to let go of their own internal data centers may have had their hand forced by the pandemic – and that will likely speed cloud migration plans.