After contracting by 5% in 2020, IT budgets grewOpens a new window 8% in 2021, driven by strong demand for AI, automation, and cloud technologies. And this momentum is set to continue in 2022. Spiceworks’ 2022 State of IT report predictsOpens a new window a majority of businesses (53%) will increase IT spending in 2022. Here, we look at the top priorities for organizations that will drive IT spending in the year ahead and the forecasted spending patterns of enterprises and SMBs.Â
The hybrid work era, which coincided with the standardization of the cloud as the backbone for enterprise operations, has put in motion renewed demand for software and services to modernize organizations’ technology infrastructure. As Jim Rapoza, the VP & principal analyst at Aberdeen Strategy & Research, puts it, the push to modernize all aspects of IT is “the number one IT initiative for a majority of businesses.†Organizations realize that merely investing in a hybrid cloud or edge computing is not enough. They also need to deploy many other technologies to modernize successfully.
“When we specifically ask organizations if they are planning to implement hyper converged infrastructures, or SD WAN or Kubernetes management, the numbers are not that high. But when we look at businesses in the process of modernization, we see large jumps in the adoption of these and other technologies needed for modernization. So look for increases in these technologies, even if companies aren’t specifically planning to adopt them,†Rapoza says.Â
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Need to Modernize Is Driving IT Spending
There is an urgent need to modernize the IT infrastructure. ResearchOpens a new window by NTT Data reveals outdated software programs and devices “put customers, users, information, assets, and reputation at greater risk for data privacy non-compliance, which can increase the institution (and ultimately customers), exposure to financial crimes and fraud.â€
“By far the biggest trend we see in IT infrastructures for the near future is the push to modernize all aspects of IT. It’s the number one IT initiative for a majority of businesses in our research.â€
– Jim Rapoza, VP & Principal Analyst at Aberdeen Strategy & Research
Edmund Tribue, the risk and compliance practice leader for NTT DATA Services, says that improving customer experience is the foremost priority for organizations and drives their modernization efforts. This is because customer-centric companies are 60% more profitable than those that do not prioritize CX. He says that persisting with legacy platforms and solutions “will cost organizations in the long run and lead to annual budget increases that outweigh the cost and maintenance of adopting modern platforms.â€
Organizations understand the value of investing in modern technology to drive efficiency and cut costs. The Spiceworks’ 2022 State of IT report, based on a survey of more than 1,000 technology buyers in companies across North America and Europe, found that organizations, especially those with more than 500 employees, will leverage rising revenues in 2022 to hike their IT budgets.Â
Among the top factors driving IT spending will be increased focus on security, businesses’ determination to assign higher priority to IT projects, upgrade outdated IT infrastructure to modern standards, support a remote workforce, and drive employee growth. “The top reasons why companies plan to grow their budgets are increasing priority on IT projects, replacing the need to update older technology which used to be the primary reason for over a decade,†said Peter Tsai, the head of technology insights at Spiceworks Ziff Davis.
Here’s a look at the top technology products and services that would garner the lion’s share of organizations’ enhanced IT budgets in 2022.
Cybersecurity
According to Tsai, growing security concerns, driven by persistent ransomware, supply chain, and vulnerability exploitation attacks in recent years, are primary drivers of tech budget increases in 2022. As a result, companies are increasingly deploying emerging security solutions to protect their data, devices, and end-users.Â
“Our study reveals that within the next two years, most companies have plans to adopt employee security training tools (76%), anti-ransomware solutions (76%), hardware-based authentication (68%), breach detection and response (59%), zero trust security solutions (57%), and user behavior analytics tools (53%),†he says.
Tsai adds that as companies shift IT spending from on-premises infrastructure into cloud services, 50% of business workloads will run in the cloud by 2023. As a result, planned adoption of cloud workload protection solutions has snowballed: 46% of companies currently plan to use these cloud security solutions, up from only 32% just two years ago.
“The top reasons why companies plan to grow their budgets are increasing priority on IT projects, replacing the need to update older technology which used to be the primary reason for over a decade.â€
– Peter Tsai, the head of technology insights at Spiceworks Ziff Davis
Small and medium businesses (SMBs), according to technology consulting firm Analysys Mason, will instead spend a significant portion of their IT budgets on purchasingOpens a new window managed security solutions from MSPs. The firm predicts that SMB spending on managed security solutions through managed service providers (MSPs) worldwide may grow by 18% year on year from $9.9 billion in 2021 to $11.7 billion in 2022.
“SMBs are facing an increasing number of vulnerabilities due to dispersed employees and general uncertainty, so cyber security will be a key priority for many in 2022. Most SMBs are ill-equipped to implement and maintain the proper security solutions. The increased demand for secure IT, along with the need for support, will drive rapid spending growth on managed security in particular,†it said.
In 2022, SMBs will also invest heavily in mobile security solutions, indicating the need to secure employees’ devices as they work from home. Analysys Mason predicts that SMB spending on mobile security solutions will rise by 29% year-on-year from $435 million in 2021 to $564 million in 2022.
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Cloud-based Services
According to the 2022 State of IT Report, the shift of data, applications and services away from on-premise data centers has increased organizations’ spending on cloud-based or hosted services from 22% of overall IT budgets in 2020 to 26% in 2022. Organizations will reduce their spending on hardware significantly to allot more resources to cloud-managed and cloud-hosted services.Â
While spending growth in the cloud category between 2019 and 2021 was energized by adoption of productivity apps and online backup and recovery, growth in 2022 will be fueled by security solutions and desktop-as-a-service — applications that are relevant in a not-so-alternate reality where more employees work from home, the report indicates.
According to Analysys Mason, SMBs will also invest heavily in SaaS products and solutions in 2022, and AI-enabled tools will be a key driver of such spending. “The increasing availability of affordable AI-powered smart solutions will accelerate the automation of business operations among SMBs, especially in the areas of cyber security, CRM, customer service, marketing, HR, collaboration and accounting/finance. SMBs’ spending on SaaS solutions in these areas is expected to grow by 15% year-on-year to $99 billion in 2022,†the firm said.
For instance, AI-based SaaS tools such as AWS’s pay-per-use AI tools, HubSpot and QuickBooks Online have already garnered significant adoption among SMBs. The demand for solutions like these will continue to rise in the year ahead.
Hardware
As per research from Spiceworks and Analysys Mason, enterprises will spend heavily on hardware products like laptops, PCs, printers, security appliances, storage devices, servers, and peripherals to support a hybrid work environment. SMBs, on the other hand, will opt for cost-saving solutions such as PC/device-as-a-service (PC/DaaS) contracts to save costs and make the most of their limited IT budgets.
According to the 2022 State of IT Report, SMBs will allocate between 31% to 33% of their IT budgets on hardware purchases compared to enterprises (30%). However, Analysys Mason says they will optimize such spending by choosing subscription-based models for PCs and devices. This will give them the flexibility to add and remove devices as their needs change and let service providers manage upgrades, support and maintenance.
“The PC/DaaS model is a perfect fit for the constantly changing IT environment, and makes acquiring technologies more efficient. SMB spending on PC/DaaS worldwide is expected to grow by 13% year-on-year from USD8.6 billion in 2021 to USD9.7 billion in 2022,†the firm said.
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Productivity and Collaboration Tools
Based on insights from IT decision-makers, the 2022 State of IT Report predicts that productivity software could be the most prominent software spending category in 2022, accounting for 12% of IT budgets. Amidst the switch to hybrid work, spending on productivity software will enable employees to work from anywhere without compromising efficiency. Both enterprises and SMBs will invest heavily in these solutions.
Analysys Mason states that several prominent vendors, such as Cisco, Microsoft, Salesforce and Zoom, will enhance their offerings to facilitate hybrid working scenarios in 2022 and SMB spending on collaboration solutions is expected to grow by 13% year-on-year from $48.7 billion in 2021 to $55 billion in 2022.
Gartner’s Forecast
In January, technology research firm Gartner also publishedOpens a new window its forecast for worldwide IT spending in 2022. Noting that organizations worldwide will spend $4.5 trillion this year, 5.1% more than in 2021, Gartner said consulting, and managed services will take up $1.3 trillion, up 7.9% from 2021. The reliance on managed services increased due to staff skills gaps, wage inflation, and talent war.
“Through 2025, organizations will increase their reliance on external consultants, as the greater urgency and accelerated pace of change widen the gap between organizations’ digital business ambitions and their internal resources and capabilities,†the firm said. Worldwide spending on enterprise software, including SaaS tools and solutions, will also increase by 11% in 2022 to $671.7 million this year.
In Conclusion
2022 could be a watershed year in how organizations allocate resources to modernize their IT infrastructure and invest in futuristic projects to maximize productivity and customer experience. Organizational spending on cloud-hosted services is quickly catching up with hardware spending, managed security and software services are gaining increasing adoption among SMBs, and IT spending on collaboration and productivity software will continue at the same pace as during the early days of the pandemic. Simply put, the quicker organizations replace legacy technologies and embrace digital transformation, the greater their chances of staying ahead of the curve in the years ahead.
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