Spending Outlook Slows for Q2 but Set to Pick Up in Second Half of 2021
Source: S&P Global - 451 Alliance April 14, 2021 Research Report
The business IT spending outlook for Q2 is stable, but the rate of improvement has slowed compared to the last couple of quarters. The slowing cuts across both budgeting and willingness to spend, and is the result of increased uncertainty, as it is unclear how the waning pandemic will ultimately impact IT initiatives. On the bright side, the outlook for the second half of the year shows improvement as companies expect the economy to continue to heal.
This report represents the findings of a February 2021 survey of approximately 500 primarily North American corporate respondents from 451 Alliance’s Leading Indicator panel focused on information technology spending plans in their organizations.
UNCERTAINTY CREATES DRAG ON SPENDING OUTLOOK
Similar to last week’s business trends report, our latest corporate IT spending survey is also picking up a sideways move. The results are virtually unchanged, with 19% of respondents saying their company will either decrease spending or spend nothing, while 12% say increase – a net zero change compared to the previous survey in November.
What we are seeing is an increase in uncertainty. The number of respondents saying they ''don’t know" what will happen with their IT budgets jumped from 8% to 15%. As we move through the remainder of the pandemic, it’s likely some respondents are unsure how this will impact IT-related spending.
Over the previous couple of quarters, spending improved as IT departments had to scramble to support work-from-home and other initiatives to keep both employees and customers engaged. As the need for these initiatives gradually decreases and more hybrid engagement models take their place, they could cause a net positive or negative depending on the company and industry in question.
A LOOK AT SPENDING BY CATEGORY
Where are companies spending their IT dollars? To get at this important aspect of business technology spending, we asked respondents about what categories of products they would be spending on over the next 12 months. Four categories rose to the top: business applications (28%), security technologies (27%), PCs (27%) and IT infrastructure (25%). Spending across these categories shows companies are expecting to continue to lean on work-from-home, collaboration and data access policies a bit longer while leveraging cloud computing resources. Only 16% of respondents said their companies don’t plan to spend on any of these categories.
We then asked a follow-up question to gauge whether companies were increasing or decreasing their spending on each of these categories compared to last year. Across the board, more companies plan to increase spending than decrease, giving every category a net positive outlook for the next 12 months. In terms of which categories are driving the most IT investment, the survey shows security technologies (54%) and IT infrastructure (54%) gaining the biggest increases. Security and infrastructure are foundational technologies, so it’s not unexpected that they would get a greater increase in spending than the software and systems that would be enabled by them.
In the case of business applications, PCs and mobile devices, after a year of higher usage due to the changes brought on by the pandemic, respondents see less of a need to invest at the same level in those technologies over the next 12 months compared to the other categories we asked about.
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