The complete lockdown due to the global pandemic is creating an unprecedented buzz in the technology infrastructure market. It’s too early to publish a comparative statistic of the IT spending of various industries but the real existing analysis will give us indicators where this segment is heading.
As various reports explain the average IT budget across all industries was 8.2 percent of the revenue. Software and hosting companies had the highest allotment for IT expenditure as compared to revenues. Financial services companies also kept higher than average spending which is 10 percent of the total revenue.
Regardless of any particular industry, 56 percent of business entities expected a normal increase in IT spending in 2020 and 20 percent expected a decrease but the complete business lockdown brought an unprecedented spending. However, there was remarkable variation among industries, with 85 percent of retail segment planning to increase 2020 IT budget, more than double the 42 percent of FMCG and consumer products companies.
As per the industry statistics, almost 50 percent of IT spending is allocated to a combination of on-premises software which accounts to around 22 percent, SaaS as 7 percent and IaaS/PaaS touches 18 percent. The total cloud budget across SaaS and IaaS/PaaS is around 25 percent. However, many of the industries spend a bit beyond 30 percent of their IT budget on cloud. Healthcare is at top position which comes at 33 percent, technology hosting reaches 32 percent and fast-moving consumer products were also allotted a budget of 32 percent.
There is a high wave that many companies plan to shift spend away from software toward SaaS in 2020, which will be strongly accelerated now due the impact of COVID-19.
Reports show throughout all industries, 55 percent of organizations are planning to cut spending for on-premises software in 2020, compared to 23 percent expecting to increase. At the high end, reports explain 34 percent of retail organizations are growing on-premises software investments.
In another flipped scenario of on-premises software, 81 percent of organizations regardless of the difference of industries, are expected to increase SaaS spending in 2020, with 28 percent expecting remarkable increases. In an online survey, Transportation and logistics companies are aggressively shifting from on-premises to SaaS, with 94 percent allotment to increase SaaS investment.
Most of the enterprises are reducing their use of data centers and switching workloads to public cloud IaaS/PaaS. When the number of data centers will go down for most organizations it is obvious that the use of public cloud will go up drastically for 86 percent of organizations as many studies indicate. Another significant trend in the segment of Transportation and logistics companies is they are shifting quickly to IaaS/PaaS with increased spending.
When we discuss the technology investment of various industries across the globe one of the high rated report shows that, the top three strategic initiatives in recent times were digital transformation, cybersecurity and cloud which accelerated the IT consumption of the enterprises. However, the emphasis on those varied significantly among industries.
When we talk about the above-mentioned strategies referred in many researches, I can emphasize on a certain point that services organizations were most likely to focus on digital transformation, with 95 percent ranking it as one of their top three initiatives. The same report says 74 percent consumer products organizations and 69 percent retailers were also significantly more likely to mark digital transformation as a top initiative. Due to facing significant competition from online retailers, they are focusing on multiple technologies to help them improve digital and multi-channel customer experiences. In a high competing scenario Transportation and logistics are focusing on how to make last-mile delivery more cost-effective which leads them to think about digital transformation.
We cannot expect an extra spending from Technology hosting and software companies as they are the least likely to focus on digital transformation, because these organizations have already made the shift to digital.
Another fact finding report shows the investment in cybersecurity that with Industrial products 61 percent, healthcare 60 percent and financial services 56 percent, organizations were most likely to rank cybersecurity among their top three initiatives. Surprisingly, given several high-profile security breaches of customer data, only 31 percent of retailers reported cybersecurity as one of their top three focus areas which is going to change in coming days.
The same report explains that technology hosting 67 percent and software companies 59 percent lead the pack in citing cloud as one of their top three initiatives. They are followed closely by retail 47 percent, healthcare 44 percent and services 43 percent industries, with a higher than average focus on cloud. On the contrary, only 31 percent of transportation and logistics companies were focused on cloud initiatives, a seeming contradiction with their first-place position in the expected growth in IaaS/PaaS and SaaS spend.
Another variable to assess the IT spending inside any organization is the employee to IT proportion. On average, organizations reported 13.8 percent of employees were in the IT function which will increase in the post COVID-19, business action-plan. Technology hosting 41.5 percent, software 36.5 percent, financial services 16 percent and services 14.2 percent companies showed higher than average numbers of IT employees. Consumer products and healthcare organizations were just below the average with 12.4 percent and 11.6 percent of employees in IT respectively, while retail, transportation and logistics and industrial products industries were below 7 percent.
Let me quote the 2020 technology spending report that found 26 percent of IT spend was controlled by business units, but that increased to 28 percent for organizations with more than 10,000 employees. However, technology hosting, software and financial services organizations reported that 34 to 35 percent of IT spend is decentralized and controlled by business units.
This article is prepared on the basis of post COVID-19 scenario. Various online surveys and reports show on average same spending or budget allotment across the industry but we don’t have sufficient data to predict the trend in post COVID-19 time.