News

IT Budgets Expected To Increase Next Year, but IT Hiring May Decline

• By Kurt Mackie
• 09/26/2022

About half (51 percent) of IT departments are planning to increase their IT budgets in 2023, compared with a prior-year's sampling, despite concerns about a general economic recession, per a newly published annual report.

The "2023 State of the IT Report," announced on Tuesday by Spiceworks Ziff Davis, contains insights about IT spending and technology plans. It typically contrasted enterprise spending with small business spending plans. The report is based on a survey of "968 IT buyers from organizations across North America and Europe" that was conducted in June of 2022 by the group's Aberdeen Strategy & Research division.

While the 2023 IT budgetary increase plans may seem positive in terms of IT prospects, the report's authors noted that inflation is already a factor in such spending estimates. They noted that "40% of budget increases in 2023 will be influenced by inflation, compared to 22% in 2022."

Organizations are reacting to economic pressures by doing things like "reducing nonessential spending" (43 percent), "reevaluating vendors or contracts" (30 percent) and "decommissioning infrastructure" (29 percent). A freeze in hiring strategy, though, was listed at 27 percent, per the survey results.

Organizations that have already taken steps to address the recession aren't cutting IT funding, though, noted Peter Tsai, senior technology analyst at Spiceworks Ziff Davis, during a Monday online presentation of the report's results.

"Companies that are cutting back in other areas are actually putting that money into IT," Tsai said.

IT Spending Priorities
IT departments are mostly planning on spending their IT budgets by upgrading outdated infrastructure (51 percent). Other top spending plan considerations were listed as follows:

• Increased priority on IT projects (45 percent)
• Employee growth (43 percent) and
• Increased security concerns (41 percent)

Hardware plus software and services purchases are typically where IT organizations plan to spend. Product end-of-life considerations and refresh cycles typically drive these spending considerations.

The top hardware purchases under consideration by respondents were laptops (18 percent) and desktops (13 percent). The top software purchases were centered on security software (11 percent), which equaled the traditional high spending area of productivity software (11 percent).

Managed services grew 11 percent, compared with 8 percent in the prior-year's survey results. A perceived shortage of IT talent to hire may be the cause of increased managed services spending, per the report's authors.

Emerging-trend IT growth areas for spending included 5G, edge computing, serverless and artificial intelligence, according to the online presentation.

IT Hiring Expectations
The report included estimates on IT hiring trends. Most businesses (59 percent) expressed a belief that it's somewhat difficult or very difficult to hire skilled IT workers.

Meanwhile, a good number of IT pros (34 percent) are planning to "look for jobs in 2023." The report's authors suggested that IT pros are seeking better pay, but also they may be looking elsewhere because of return-to-office mandates.

"Nearly a quarter (23%) [of IT job seekers] will only apply to fully remote roles, up from 18% in 2022," the report indicated.

Per the survey results 85 percent of organizations had asked their employees to return to physical offices following the work-from-home precautions that were instigated in 2020 to address the pandemic.

The report speculated that the return-to-office phenomenon had affected IT spending somewhat. For instance, spending on managed services was 15 percent before the pandemic, but respondents expected it would be 18 percent in 2023. Cloud spending was 22 percent in 2020 and 26 percent in 2022, but it is expected to fall to 23 percent in 2023.

Despite those dynamics, IT departments may be less likely to hire IT personnel in 2023. The report indicated that "31% of IT departments plan to hire additional tech staff in 2023, compared to 40% in 2022." Larger businesses are more likely to hire IT personnel than smaller ones, per the report.

IT pros are seeking to update their skills. The report's authors estimated that "62% of employees within the IT sector will need to be 'reskilled or upskilled' over the next few years." Per the survey results, almost a third of respondents said they expected to obtain a technical certification in 2023.

In general, organizations are planning to spend on updating IT infrastructures and security. Inflation is just a "secondary factor" in the 2023 IT budget increases, according to Tsai.