COVID-19: IT Spending at a Crossroads

Will IT spending increase or decline because the COVID-19 economic slowdown? Will IT be hurt by macroeconomic conditions, or will it benefit from the move to remote working? The answer changes day-by-day. Our assessment as of today is that short-term and long-term spending on security, cloud and software enabling work-from-home (WFH) will offset declines due to lay-offs and a bad economy.

Apr 9th, 2020 9:28am by Lawrence E Hecht

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This article was updated on April 10, 2020.

Will IT spending increase or decline because of the COVID-19 economic slowdown? Will IT be hurt by macroeconomic conditions, or will it benefit from the move to remote working? The answer changes day-by-day. Our assessment as of today is that short-term and long-term spending on security, cloud and software enabling work-from-home (WFH) will offset declines due to lay-offs and a bad economy.

In the face of a recession, companies have tightened the reins on spending and accelerated layoffs, especially at tech startups that have not secured long-term funding. Last week, IDC predicted a 2.7% drop in IT spending this year due to delayed spending on new projects and the end of a refresh cycle for PCs. IT executives surveyed in March by another firm predict a 4% decline in IT budgets as compared to their original IT budgets. In this scenario, overall IT spending may be flat in 2020 because the decline balances what had been significant increases in predictions just a few months ago. Timothy Prickett Morgan summarizes this scenario when saying that the IT sector can weather the pandemic storm.

Conventional wisdom has actually moved towards estimates of increased tech spending. Indeed, a March survey of IT decision-makers by S&P Global’s 451 Research found that 34% expect to spend more on IT resources and assets due to the coronavirus outbreak, with only 4% seeing declines. The largest companies in this study expect the largest increases in spending on specific types of technology tools: 63% of respondents at companies with more than as billion dollars of revenue expect increased spending on employee communication/collaboration and 46% see more spending on information security tools like VPNs.

Many other surveys are also predicting increased technology spending to support working from home. Forty percent of software buyers/users expect software spending to increase because of COVID-19, while only 18% expect declines according to a survey conducted by technology peer review site TrustRadius March 18 and 19. Junior-level employees were more likely to be positive on spending, while more seasoned respondents are more likely to have a wait-and-see outlook. Its competitor G2’s survey of “B2B workers” found that 47% expect employer’s software spending to change in response to COVID-19 with only 12% expecting a decrease. Both sites have seen significant increases in traffic from people evaluating remote work-related tools. We have to take the data from these sites with a grain of salt because respondents are more likely to be narrowly focused on their recent evaluations of Zoom and its many virtual meeting alternatives.

63% of big companies increasing spending on employee communication/collaboration because of the coronavirus. That’s almost double the 34% of smaller firms (< $1billion revenue) that are increasing spending on this. Source: 451 Research’s “The Voice of the Enterprise: Digital Pulse, Coronavirus Flash Survey”.

Feature image by Manfred Antranias Zimmer from Pixabay.

Lawrence has generated actionable insights and reports about enterprise IT B2B markets and technology policy issues for almost 25 years. He regularly works with clients to develop and analyze studies about open source ecosystems. In addition to his consulting work,...