IT Budgets 2021: More Tech Dollars Will Go to Cloud & Hardware

Safe to say — in times of crisis, IT decision makers (ITDMs) are forced to take a hard look at what’s core to their business operations. When the COVID-19 pandemic struck in early March, companies of all sizes leaned into third-party cloud, SaaS, and hosted services to keep the business running from anywhere — clearly showing what the most immediate IT priorities were during the initial rush to remote work. The cloud had already been a strategic focus even before the pandemic hit but the crisis vaulted it into the “fastest growing tech category.” 

Findings from the newly released Spiceworks Ziff Davis 2021 State of ITOpens a new window report reveal the pivot to large-scale remote work buoyed cloud spending significantly. The report finds 32% of organizations have either migrated or plan to migrate workloads to the cloud. 

Robin PetoOpens a new window , Director of Research Strategy at Spiceworks Ziff DavisOpens a new window outlines the factors that signal heavy spending on cloud. “Cloud as a category covers so many different sub-facets and a lot of companies are already working to migrate their workloads – whether that be infrastructure as a service, hosted solutions or file storage. Another way to look at it is through desktop infrastructure, the number of companies investigating VDI is much higher than what was seen in the past and probably wouldn’t have occurred without COVID-19 transformation,” Peto said. 

The study is conducted in the backdrop of the pandemic in June and July when organizations reeling from the economic meltdown put in place several belt-tightening measures to address long-term initiatives. Around 1000+ ITDMs from North America and Europe were surveyed to understand shifting investment priorities across software, hardware, cloud services, emerging technologies and managed IT services over the next 12-18 months. The report also includes business-level intent data, mapped by tracking the changing demands across various tech categories that provide additional insights into organizations’ behavioral patterns. 

The report paints a telling picture of the impact of the health crisis on IT budgets, the COVID-19 boosted shifts, technologies that will be front and center over the next year and why future tech is expected to see a massive stall under the thumb of the pandemic. 

Here are five big takeaways for C-level execs building the 2021 tech roadmap: 

Learn More: Outlast Uncertainty: 5 Ways To Retool IT Budgets Now

1. Cloud is the fastest-growing tech category

Undeniably, cloud is the biggest winner in the pandemic-era. Amid the shorter-term scramble, businesses turned to cloud to get the accessibility needed for enabling business continuity and as the dust settles in 2021, a significant chunk of cloud/hosted services spend will go towards online backup and recovery solutions and online productivity software. Though the outbreak catalyzed a shift to cloud-enabled infrastructure, the report estimates that since 2018, cloud budgets have seen a three percentage point increase in overall IT budgets. Consequently, the growth in cloud pushed up the adoption of productivity apps, cloud storage, and communications solutions — tech that underpins smooth WFH processes. The post-pandemic outlook for managed service providers (MSP) is also bright with organizations relying more on MSPs for IT services. Per the report, enterprises are projected to invest “a greater portion of IT budgets than SMBs to hosted/cloud and managed services.” 

2. Remote work goes mainstream. See how businesses are adjusting

The report suggests that what was initially viewed as a temporary business disruption now requires more permanent considerations for remote enablement. The biggest long-term impact has been on workforce transformation with 64% organizations enabling remote workforces this year. Around 76% of organizations plan long-term IT changes and over half of all companies plan to retain flexible work policies even after the pandemic ends. To support the new workforce dynamics and breed operational agility, 36% plan to improve IT operations and systems performance and 27% of IT executives are rewriting disaster recovery plans, factoring in all-case scenarios to survive the COVID-19 and next crisis as well. Now that we aren’t going back to corporate HQs anytime soon, 33% plan to spend big on improving security, risk, & governance to plug existing security gaps in widespread remote environments.  

Learn More: Automation: One Solution for Coping With Limited IT Budgets 

3. Hardware accounts for the biggest spend in 2021 IT budget

It’s no secret that tech budgets suffer from the pandemic crunch and organizations worldwide announced action plans to weather the shock.  On the positive side of things, it also inspired businesses to speed up digitalization. As Peto says, “COVID-19 has had a profound impact on the tech landscape and we’ve seen it has actually been a catalyst for business transformation with companies making so many changes that they may not have expected to. These transformations will be long-lasting and have an impact on the IT budgets.”  The report estimates 80% of IT budgets will either increase or stay the same between 2020 and 2021. Among the different categories in the IT budget, hardware accounts for the biggest spend in 2021 with 31%, followed by software at 29%. Other booming categories in the tech stack tipped to grow are hosted/cloud-based services (24%) and managed services (16%). A large chunk of the hardware spend will go towards provisioning laptops, desktops, and servers in 2021 while spending on on-premise servers and printers is expected to drop.

4. Future tech will take a big hit in the downturn

The hype around emerging technologies — 5G, blockchain, AI/ML, virtual reality, edge computing, hyper-converged infrastructure among others has reached a fever pitch but the real-world use cases are yet to be defined. Take the case of 5G — widely pegged as the next big disruptor in tech until the outbreak hit, forcing telcos to re-evaluate their go-to-market strategies.  Following the shakeup of the pandemic, IT leaders are funneling budgets towards software and hardware versus “aspirational” projects that may not yield an immediate return on investment. The report predicts Year-over-Year (YoY) declines in plans to implement emerging technologies. “This year the pandemic affected these future-looking tech plans as organizations scrambled to meet very urgent and unexpected challenges rising from COVID-19,” said Peter TsaiOpens a new window , Senior Technology Analyst at Spiceworks Ziff DavisOpens a new window . Less than half of IT executives (47%) plan to invest in IoT over the next year versus 54% in 2020 while interest in edge computing has dropped by 10 percentage points compared to 2020. 

Learn More: 5 Ways to Increase Cyber Resilience Amid Strained IT Budgets 

5. Other drivers for tech investments in 2021

Though hardware and software are tipped to trend up in 2021, there are a slew of other factors that will influence purchasing decisions apart from the crisis. For instance, end of life technology, upgrade/refresh cycles, and company growth will continue to drive investments in 2021. North American businesses are set to outpace their European counterparts in tech spend on new technology to replace end-of-life software/hardware, upgrade/refresh cycles, support business growth, project, and end-user needs among others.  Meanwhile, European businesses are more likely to drive tech spends for supporting remote workforces and tackling security/incident breaches. 

To view the full report, click hereOpens a new window . 

Editor’s note: Toolbox is part of Spiceworks Ziff Davis, a global marketplace for connecting technology buyers and sellers. For more information, visit Spiceworks Ziff DavisOpens a new window .  

What changes do you expect in your organization’s IT budgets in the next 12 months? Comment below or let us know on LinkedInOpens a new window , TwitterOpens a new window , or FacebookOpens a new window . We’d love to hear from you!