With inflation at a 40-year high, soaring energy costs, and a plunging stock market, what’s the outlook for IT and B2B tech spending in 2023? The answers may surprise you.
Spiceworks Ziff Davis (SWZD) just released its 2023 State of IT research report. It’s a fascinating read, but tl;dr it clocks in at nearly 5,000 words(!).
Pressed for time? Here are a few of the key highlights.
Despite the fact “83% of companies are concerned about a recession in 2023” and are taking various steps to prepare (e.g., “reducing non-essential spending”—seriously, when do enterprises ever spend money on things that aren’t essential?), more than half of the companies surveyed plan to increase IT spending in the coming year, while just 6% anticipate cutting budgets.
Roughly one in five enterprises will seek to “reduce software licenses / seats” as part of cost reduction efforts. They may want to look to automate business processes in order to cut those expenses intelligently rather than recklessly.
Organizations in IT and financial services are most likely to say their tech budgets will increase in 2023, while those in the education sector are least optimistic.
Furthermore, despite the gathering storm clouds of recession, 58% of respondents expect their company revenue to increase year-over-year, while just 10% are projecting a decline in revenue.
The four top reasons for IT budget increases in the coming year, per the report are:
Other significant factors (mentioned by a third or more of respondents) included accounting for inflation, and supporting a remote / hybrid workforce.
None of those concerns are particularly surprising, but what’s unexpected is what’s not on the list: increasing automation to reduce the need for labor.
The labor market is tight, particularly for skilled / knowledge workers. Companies can’t afford to have smart, talented employees wasting time on simple, repetitive administrative tasks. Enterprises will need to invest in technology that improves productivity by automating low-level tasks in sales, HR, accounting, finance, supply chain, and other functions.
At a high level, budget allocations don’t look a whole lot different for 2023 than they did in 2021. A little less on hardware and software, a little more for managed services.
But looking just a bit deeper, per the SWZD report, “spending on managed services (which can be used to service both cloud and on-prem infrastructure) rose to 18% of IT budgets in 2023, up from 15% before the pandemic.” That’s a clear trend.
Greater focus on cybersecurity: “The largest share of 2023 IT software budgets will go towards security software, narrowly rising above productivity software, which is historically on top. This increased emphasis on cybersecurity is mirrored in increased spending on managed security services as well.”
Move from on-prem to managed services: “On-premises spending on industry-specific applications has fallen significantly — while simultaneously, managed businesses application spending has increased significantly, which suggests that many businesses will shift the burden of managing these applications to a third-party provider.”
Continued focus on top three areas: “Productivity solutions, online backup and restore, and business support applications will be the top three areas (where) businesses spend.”
Among other key findings from the report, within the top emerging technologies are IT automation, the Internet of things (IoT), 5G, edge computing, and AI.
Top use cases for AI include data analytics, automation, and intrusion/fraud detection.
Supply chain issues, inflated product costs, and chip shortages all continue to be among the top concerns for IT leaders, while the shortage of skilled IT labor is an emerging worry.
The good news for marketers is that, despite the economic headwinds of inflation and recession, there’s a lot of good news in this report. Buyers are likely to shift their spending priorities, but not stop spending.
Here are three areas for B2B tech marketers to focus on in their strategic planning for the coming year:
Messaging: Among the top factors leading to increased IT budgets in the coming year are “need to upgrade outdated IT infrastructure,” “increased security concerns,” and supporting a remote / hybrid workforce.
Almost any technology solution can address at least one of those priorities. If your messaging doesn’t address any of those concerns, it may need revisiting.
Every marketer knows their core messaging has to address the pains their prospective customers are feeling. But with inflation raging and a recession looming, the key is to address the concerns your prospects have now, which are likely quite different than their top worries of a year or two years ago.
Targeting: How you modify your messaging will depend on the characteristics of the organizations you target, or can target, with your offerings. According to the SWZD research, enterprises are paradoxically more likely than midmarket or SMB companies to reduce their workforces and close stores or offices in the face of a recession—but also the most likely to increase their IT spending.
So, if you’re selling to enterprises, explaining how your technology improves efficiency, replaces outdated technology, and/or helps reduce overall software licensing fees will be most compelling. SMBs, on the other hand, are more focused on customer experience.
In terms of industry, financial services and IT services are most optimistic about increasing IT budgets in the coming year, while the education sector is the least likely to raise spending. But that’s only a high-level view. Each industry sector will face its own unique challenges and opportunities as economic and employment growth slow.
Healthcare, for example, is facing unprecedented challenges in revenue growth in conjunction with labor shortages. Investing in technology is imperative, but every investment will be closely scrutinized. In the words of David Cole, president at MUSC Health:
Marketing operations: With an economic downturn on the horizon, it’s essential to look internally at your own technology, processes, and spending priorities.
For example, if we have a combination of weaker economic growth and continued travel glitches, live events may be in for a tough year. Events are too productive to drop entirely, but look at every opportunity closely and choose strategically.
Online events are an alternative and have gotten significantly more sophisticated since early 2020, but measurement has also improved. Consider sponsorship opportunities with organizers who can show a track record of proven ROI.
This also may be an advantageous time to upgrade your marketing technology stack (or more accurately, your martech matrix) with artificial intelligence (AI) tools for sales and marketing. The primary marketing use for AI currently is to pull actionable insights from analytics data. It also has some intriguing vertical market applications, such adding intelligence to healthcare CRM.
Be wary though of using AI for content creation, which remains early stage. There’s more hype than reality around these tools today. While they may be helpful in crafting short snippets of text like email subject lines or search ad copy, don’t count on AI to write your blog posts. And keep in mind that Google views AI-generated content as spam.
There’s a lot more in the SWZD 2023 State of IT research report, so check out their full findings and how those may impact your plans for next year.