Despite the economic uncertainty experienced at the tail end of 2019, a recent IDG survey of IT decision-makers indicates that most expect IT budgets to continue to grow in the coming year. Further, IT leaders revealed that the IT department will be evaluated mostly on performance on key business measures such as customer loyalty and return on investment.
The findings stand in contrast with the conventional wisdom that as business growth sags, so too will technology investments, and they signal the continued emergence of IT as being a strategic driver of business value and crucial to digital business strategies. As technology increasingly shifts toward cloud-based services and less reliance on expensive, long-term capital investments, there’s good cause to think that IT is far better prepared to ride out economic cycles than in the past.
Since 1945 the United States has weathered 11 economic contractions or recessions, and any projections for when the next one is coming should be viewed skeptically. “Wall Street indexes predicted nine out of the last five recessions!” the noted economist Paul Samuelson quipped in 1966. Despite constant predictions that the next recession is coming, the economy has experienced the longest-lasting expansion on record since the end of the “Great Recession,” in mid-2009.
Still, ultimately every expansion is followed by a contraction, so it’s incumbent on IT leaders to plan how they can best deal with economic cycles.
Past economic recessions have not been kind to IT, with business spending in this area declining at twice the rate of real gross domestic product (GDP), the traditional measure of economic health. That may largely reflect historic views that IT was mainly keeping systems running rather than creating business value.
IT’s mission is evolving to play a more central role in an enterprise’s value creation, rather than just maintain operations. IDG’s 2019 State of the CIO reported that 62% of the IT leaders in its survey said their job responsibilities involve creation of new revenue generation initiatives, which include the development of new products or services, and 91% indicated that their role is becoming more digital- and innovation-focused.
Previous IDG research on how businesses are pursuing initiatives focused on customer-experience-oriented digital transformation supports the notion that IT is taking on an increasingly strategic business role and is viewed as pivotal to future growth. According to that report, 76% of the IT decision-makers surveyed indicated that they are feeling pressure from multiple sources in the organization to deliver digital customer experiences.
With lines of business increasingly looking to IT to drive revenue and customer satisfaction, there’s a strong case to be made that CIOs and their departments will find themselves more “recession-proof” when the next downturn arrives.
To gain further insight into how the trend to value creation is impacting IT budgets, IDG recently surveyed IT decision-makers at companies ranging in size from 200 to 499 employees, to those with more than 20,000 employees. (Download the full report here.)
Most of the participants in the IDG survey expect IT budgets in their industries to grow, with 35% indicating strong growth and 63% saying they’ll experience moderate growth. The top factor driving IT budgets is improving productivity through automation and/or the cloud. Innovation and/or driving new products and services is the top-ranked business priority of those surveyed by IDG, followed by revenue growth and becoming a more data-driven organization.