The 2023 State of IT: The Economy Won’t Slow Us Down

This year’s State of IT(Opens in a new window) report from PCMag’s sister site Spiceworks Ziff Davis(Opens in a new window) (SWZD) once again gives a peek into projected IT spending patterns in the coming year. And while the overall economic forecast for 2023 looks grim, that doesn’t mean companies will be cutting back on their IT budgets. In fact, most are planning to increase them.

According to the report, 60% of enterprises in North America and Europe are preparing for an economic downturn. By comparison, just 45% of small and midsized businesses (SMBs) are battening down the hatches, perhaps due to greater risk tolerance among early-stage ventures.

Europe, in particular, is bracing for impact, with fully 65% of all European companies preparing for a recession. Only 41% of North American companies are doing the same.

Expected IT Budget Changes
(Credit: Spiceworks Ziff Davis)

Those austerity measures come in a variety of forms. Reducing non-essential spending and re-evaluating existing vendors or contracts were both popular choices. And putting the brakes on hiring and even workforce reduction are both on the table.

Surprisingly, however, this belt-tightening doesn’t look like it will impact IT spending significantly. Of the companies surveyed, 51% said they planned to increase their IT budgets, year-on-year. And while that’s only about half of them, consider that only 6% said they planned to reduce their budgets. The rest plan to spend about the same as the previous year.

It’s Not Just the Economy

There’s one obvious reason why spending might increase: inflation. With energy costs soaring, particularly in Europe, the price of virtually every aspect of IT will go up.

But according to SWZD’s analysis, inflation is only a secondary driver of IT budget increases. The primary driver is the recognition that IT investments made over the past two years have paid off, particularly in light of necessary business process changes in reaction to the COVID-19 pandemic.

During a press conference to discuss the report, Peter Tsai, head of technology insights at SWZD, observed that in many ways, the pandemic was the ultimate business continuance challenge. Doubtless, many companies were caught off-guard by the suddenness and rapidity of the changes needed to maintain operations, and they won’t risk getting flat-footed again should events take another turn for the worse.

Moreover, the SWZD report observes that today’s companies no longer see IT as a cost center but as an essential enabler of operations. They’ve invested in response to new realities like remote work, and they’ve seen the results.

It’s the Security, Stupid!

In 2023, companies plan to spend their IT budgets in a number of ways. Two perennial triggers of IT purchases once again top the list, namely outdated infrastructure that needs to be upgraded and the product end-of-lifes. The report notes that support for both Windows 8 and Windows Server 2012 will expire in 2023.

However, one topic, in particular, seems to be on IT departments’ minds, and that’s security. Planned spending on security software in 2023 bumped up to 11% of IT spending, up from 10% the previous year. Spending for most other software categories decreased or remained flat. 

Curiously, though, expected spending on email servers also increased, up 2% year-on-year—perhaps reflecting a concern that aging, vulnerable email servers have increasingly become vectors for cyberattacks.

The security tools deployed by the businesses in SWZD’s survey varied. Employee security training tools remained a top response at 76%. Also popular were anti-ransomware tools (73%) and hardware-based authentication (71%). Three new entries for the 2023 report—cloud-based security solutions, passwordless authentication, and bot detection and mitigation services—also all gave strong showings, at 67%, 48%, and 47%, respectively.

All this raising of the barricades undoubtedly reflects a new and sober assessment of today’s IT landscape. With only a portion of workers returning to the office, IT pros face a lot more security concerns than they did pre-pandemic.

Struggles Still Ahead

Still, this bullish talk about IT spending doesn’t mean 2023 will be without its challenges. When asked, 22% of respondents said they still feared their budget wouldn’t be enough to accomplish company goals. Product price increases worried 46%, while 48% feared supply-chain issues. Each of those figures was up from 43% in 2022.

Current Difficulties Finding Skilled IT Talent
(Credit: Spiceworks Ziff Davis)

Another issue is just who will be doing all the needed IT work. Of those surveyed, 28% said they think IT labor or skill shortages will be a problem in 2023. One reason is that, in a labor market that currently favors employees, workers are on the move. According to SWZD’s data, 34% of IT professionals say they plan to look for new jobs in the coming year, up from 25% in 2022.

Also on employers’ minds is the thought that growing concerns that many jobs may soon be replaced by automation or artificial intelligence are creating near-term skills gaps. As IT pros move into disciplines where they perceive their jobs may be more secure, it becomes harder to fill their old roles. So while it’s good news that IT budgets are likely to remain stable despite economic woes, 2023 is likely to be another challenging year for many companies. 

SWZD’s results were compiled from 968 IT buyers from companies across North America and Europe. The figures quoted here represent just a small portion of the research. If you’d like to read the full report, you can download it for free(Opens in a new window).

Editors’ Note: Spiceworks is owned by Ziff Davis, the parent company of PCMag.