Market & Sourcing

IT budgets 2023 grow at a slower pace

by

Rise of IT budgets 2021, 2022, 2023

In 2023, IT budgets suffer somewhat from uncertainty and, because of inflationary pressures, IT costs also come back into focus. Otherwise, IT remains on track in all strategic topics.

 

2023 IT budgets will increase by an average of 4.8 percent compared to 2022. This means budgets will not be able to continue the positive development of the previous year, when the increase amounted to 8.9 percent. Both figures come from our surveys on the IT agenda 2022 and 2023. The IT budget as a percentage of revenue is now 4.2 per cent on average, which puts this figure back at a more normal level. However, keep in mind this is an average value from a survey with significant industry-specific differences.

Pressure on IT spending builds up

Past years have been characterised by strong investments in digitalisation and high IT spending driven by transformation projects. Here, the pandemic was a major driver. Now, cost pressure is putting the brakes on plans and forcing IT managers to take stock of digitalisation projects and to revise forecasts. With consequences: The necessary scope for legal adjustments, innovations and further digitalisation must increasingly come from the inventory. Therefore, CIOs are already putting run and change budgets through their paces, questioning requirements and obtaining transparency in operating costs.

Survey on the IT agenda 2023

Which will be the IT priorities in 2023?

This is particularly evident in the question about strategic IT priorities in 2023. Here, cost control has climbed back up into the midfield; in previous years, strong cost-cutting initiatives were far down the agenda. The most important IT priorities in 2023 are the same as last year: security, digitalisation, making IT more agile and flexible, recruiting IT skills as well as driving IT automation. While agility has risen one position, the search for IT skills has lost one. Other IT studies suggest slightly lower demand may be the reason.

Cost increase in IT areas

Which IT costs will rise in 2023?

Respondents to the IT Agenda survey expect IT costs to rise in all areas in 2023. However, the increase will not reach the rate of inflation. This can be explained by mitigating effects due to long-term contracts, but also by hopes the situation will improve. The fact that Workplace is at the bottom of the scale may be due to Covid-19 spending on new hardware, which companies are still drawing on. Consultant day rates will definitely rise in 2023, as our own analyses show. The respondents' estimate is relatively close to our current market data (see Metrics blog on day rates for IT consultants in 2023).

 

IT self-confidence at an all-time high

IT presents itself full of self-confidence: After setting a new record last year, even more managers are convinced of IT's contribution to the company's success in the current survey. Two-thirds of respondents are at least satisfied with the overall situation, while only about one in 14 is sceptical about IT performance. As a result, the mean score climbed year-on-year from 4.68 to 4.73 points on a scale of 1 to 6. The continuing upward trend of IT’s contribution reflects the gradual diffusion of IT into all areas of organisations, including facilities for production as well as the products themselves.

 

Request the 2023 IT Agenda

Findings are based on our IT Agenda 2023 survey, which we conducted in autumn 2022 together with the German IT users' association "Voice". Focus topic in this issue is IT sourcing destinations.

You are welcome to request a free evaluation of the survey:

Jeremy Smith

Jeremy Smith

Jeremy is responsible for UK, Benelux & Northern Europe and has been in the IT benchmarking arena for over 25 years. He previously received bench­marking exercises as an end user and delivered benchmarking exercises as a project manager.

LinkedIn