Those of us in the Salesforce Ecosystem actively follow the Salesforce release cycle, eagerly anticipate the Product Roadmap, and celebrate the completion of individual goals. Whether it’s getting Salesforce user adoption or earning new “certs” (Salesforce certifications), we all know that increasing our Salesforce education is exciting and easier than ever with resources like Trailhead and the vast knowledge of the greater ecosystem. Today, we’ll shift gears and take a step outward to learn what’s happening in the information technology landscape as a whole to explore what’s around the bend.
“What factors are affecting my company’s decision-makers?” you may ask. “What is behind actions of vendors or business customers?” we might wonder. “What is on the CIO’s mind?” Alas, we don’t have a crystal ball —but we do have some pretty solid guesses backed by data.
The role of the Chief Information Officer, IT Director, or other IT leader is, without a doubt, highly important to an organization, its security, the experience of its employees and customers, and its ultimate success. It’s even more evident in our general reliance on technology and the steady shift towards a society who lives, works, and interacts digitally.
2019 Spending Trends
Globally, the information technology (IT) industry is on pace to reach $5 trillion in 2019. Advancements and innovation responsible for this trend show no signs of stopping. On the business front, organizations will continue funneling resources into IT as we embrace more sophisticated technologies that touch every department to yield greater efficiency organization-wide.
In one report Guide to the CIO’s Tech Priorities & Spending Plans 2019 by IDG, 240 IT leaders worldwide participated in a survey to gain insight on their spending plans for 2019.
The study uncovered that over half (57%) of IT executives planned to increase their technology investments in the coming year. Only 9% indicated that they intended to decrease investment in technology.
The greatest focus areas for increased investment dollars appear to be cloud computing (67% of respondents) and cybersecurity (72%).
How about new vendors? Not so much. Only 15% of tech budgets will be spent with new technology vendors, a statistic that remains the same as the prior year projections, leading the B2B tech world to believe that they’ll likely be sparring over that small chunk of new business.
…Or will they?
Seeing that the United States is the largest tech market in the world and is expected to earn $1.6 trillion by the end of 2019, the technology industry will likely continue turning profits in the year ahead, even with new customers. (Source: IT Industry Outlook 2019) To learn more about U.S. tech spending, we examine several global projections as the two are inextricably linked.
Overall Projections for 2019
According to the CompTIA study, the global IT industry will likely reach $5 trillion in 2019. The U.S. accounts for 31% of that spending. The rate of tech services and software spending in the U.S. is far greater than that of many other global regions.
Globally, IT spending is projected to grow at a rate of 4.0% in 2019; a decrease from 5.0% last year.
Growth of 6.0% or more appears to be attainable in 2020, providing that 1) that buying patterns for core tech products and services stay the same, and 2) spending on emerging tech accelerates in 2019. On the conservative side of that estimation, any slowdown in the adoption of emerging technologies could level growth to just 1.5%.
Who’s buying all that technology? The bulk of tech spending stems from purchases made by corporate or government entities. A smaller portion comes from household spending, including home-based businesses. Note: according to some industry experts, it is difficult to classify the spending as solely business vs. consumer. As work and personal life continue to blur – especially in small business, there is a loss of distinction.
The study used a consensus forecasting approach and “wisdom of the crowds” method to incorporate feedback from large IT companies and smaller ones. It balances optimistic and pessimistic opinions of survey participants to reach a “best-fit” forecast.
Traditional top-level categories of IT spending in CompTIA’s analysis are hardware, software & services, telecom, and “other”—consisting of multi-category or emerging technologies. Here is the breakdown:
- Software and Services — 53% of spending
- Telecom – 30%
- Other – 17% (IoT, drones, automating technologies, or other emerging software-as-a-service solutions that fit in multiple categories or otherwise don’t fit in traditional buckets)
On to the numbers! At individual organizations, the average annual IT budget is $121 million. (IDG)
But what about large vs. small businesses, you might ask? It turns out that there is a significant difference in average IT budget at enterprise businesses (1,000+ employees) and budgets at SMBs (<1,000 employees): enterprise businesses have an average $212 million IT budget, while SMB budgets have a $27 million average budget.
Some increase, some stagnant
In addition, more enterprise companies expect their IT budget to increase in the coming year (61%) compared to SMBs (53%). Still, about a third of both SMB and enterprise organizations do not expect any change in their 2019 budgets, with 37% of SMB respondents and 30% of large enterprise respondents indicating no budgetary changes.
What are they using it for?
On average, 66% of IT budgets are allocated to established technologies; solutions that maintain the status quo or basic functionality of their business. These include tools that “keep the lights on” and carry out common tasks like their business administration, operations, and inventory activities. (IDG)
Organizations with these more established technologies have a greater chance of having more stagnant IT budgets. On the other hand, so do organizations who spend money on newer technology such as DevOps and enterprise mobility management. For instance, in 2019:
- 57% of IDG study respondents will spend the same amount on Windows 10
- 50% will spend the same amount on social or collaboration tools
- 46% will spend the same amount on DevOps and enterprise mobility management
Organizational Factors & Business Confidence
What goes into a CIO’s budget consideration?
Organizational and business factors are one important element. 43% of IT executives in the IDG study reported feeling pressure to make changes to IT operations or strategy. In fact, the single most important project for 31% of respondents involved business process management or workflow automation (solutions like Salesforce) .
Budgetary shifts are common in many industries — what, in particular causes budgets to change within IT space? The items to which IT leaders attribute budget changes are quite interesting:
- Project start and stops (IT project) – 47%
- System upgrades or maintenance – 43%
- Changes in IT initiatives beginning in a given year – 40%
- New mandates from executives or board of directors – 34%
Business confidence is another highly relevant factor in CIO budget decisions. According to the CompTIA study, IT executives have greater-than-average business confidence compared with the long-term average of the business confidence index, giving us insight on how these executives feel about current conditions.
The IT Industry Business Confidence Index is calculated using 3 aggregated metrics:
- Perceptions of the state of the U.S. economy
- The state of the IT industry
- Self-assessment of one’s own company
Despite business confidence rising steadily since 2009, it is notable that several large dips were noted in 2016 (Q4), 2017 (Q3), and 2018 (Q3), each reflecting a small decrease in confidence. Interestingly, the IT industry index runs counter to other industry sector or consumer indices on business confidence.
Cybersecurity: a Consistent Focus
It comes to little surprise that many businesses plan to continue increasing their investment in cybersecurity or elevating their focus on security.
Often, these actions use a defensive approach utilizing tools like firewalls and antivirus. Moving into the future, it is anticipated that more companies will take increasingly proactive approaches to probe for weaknesses or to detect potential breaches.
New skills and technical capacities like penetration testing, vulnerability assessment, and security analytics are likely to take more of a front seat in an organization’s arsenal against the constant threat of cyber crime. Other non-technical measures like improving end-user training to minimize human error and building security into every aspect of their business process is anticipated as a focus in 2019 to combat cyber threats.
Innovation presses on with the increased availability of artificial intelligence (AI) solutions (i.e. Salesforce Einstein), machine learning, big data, the Internet of Things (IoT), and Blockchain. While the general public may have varying degrees of skepticism or acceptance of these emerging technologies, 40% of IT leaders appear to favor AI and machine learning and expect this technology to positively impact their business over the next three to five years.
More than half of IT leaders (60%) consider it the most disruptive technology. 16% of larger enterprise businesses anticipate AI and machine learning among their top priorities in 2019, compared with 7% of smaller SMBs.
Big data/analytics earn another 40% confidence rating among leaders based on likelihood of a positive impact on their business in the next three-to-five years.
Other so-called “disruptive” technologies including IoT and blockchain are not fully implemented at many businesses. This may explain why about one-third of respondents had confidence in its positive impact on their business in the next three to five years.
Still, things could change soon for blockchain, which intends to provide a true and verifiable record of each and every transaction ever made in the system, and can only be updated by consensus between participants in the system. When new data is entered, it can never be erased. Promising, right?
Still, only 7% of IT executives report that their organizations are currently using blockchain. Looking to the future, 64% of IT executives have plans for blockchain technology in 2019 – quite a remarkable leap in usage, if these the respondents’ blockchain intentions were to pan out.
(Learn more about these emerging technologies in Salesforce’s recent talk, Digitizing the Customer Experience Using AI, IOT & Analytics, and Blockchain Tech.)
Drones, Robots, and Cryptocurrency, Oh My?
What about drones, robots, and cryptocurrency? It depends on who you ask! SMBs and enterprises have highly differing outlook for the potential impact of drones, robots and cryptocurrency to their business. About a quarter of SMBs view drones and robots as disruptive technologies to look out for, compared to only 13% of enterprises. And 19% of SMBs think cryptocurrency will be disruptive, compared to only 5% of enterprises. Only time will tell whose prediction is more accurate!