by Sharon Florentine

What’s driving IT budgets for 2019

Dec 14, 2018
BudgetingIT LeadershipIT Strategy

Technology leaders weigh in on where IT spend will shift, with many companies focusing on infrastructure, security, and user experience.

piggy bank on top of a calculator
Credit: Thinkstock

The majority of IT leaders expect their 2019 IT budgets to increase or remain unchanged, driven largely by the need to upgrade aging infrastructure, accelerate a shift to the cloud or improve the employee experience of what IT offers.

The 2019 State of IT Budgets report from Spiceworks surveyed 780 technology leaders and executives from organizations of all sizes across North America and Europe. While budget priorities are dependent on business size, the research found that 89 percent of respondents expect IT budgets to go up or remain on par with 2018, with 64 percent of those saying the need to upgrade outdated IT infrastructure is sparking the infusion.

Transform and secure

Expenditure increases for 2019 can be mapped roughly to organizational size, according to the research, with small organizations performing systems upgrades and larger organizations locking them down.

“Most organizations, particularly small businesses, are increasing IT budgets in 2019 to upgrade aging IT infrastructure and support digital transformation initiatives,” says Peter Tsai, senior technology analyst at Spiceworks. “However, large enterprises, typically with more data and devices to lock down, are primarily increasing budgets due to growing security concerns.”

Doug Saunders, CIO of Advanced Disposal, says his organization is targeting both, as the Florida-based disposal service will continue to focus on digital transformation as well as on security in the coming year.

“This year we’ve focused on getting our customer-facing functions digitized; our order to cash systems, for example. Working on standardizing pricing and incorporating analytics for that. Updating our CRM systems for price, quotes, e-signatures, payment,” Saunders says. “But also, because we’re public, security is a major area for budget increases. We’ll focus on data privacy and securing customer data against breaches.”

According to Spiceworks’ research, 88 percent of large enterprises are increasing IT budgets to tackle security concerns.

“With more employees to target, larger organizations recognize the importance of boosting budgets to protect against phishing attacks and avoid potentially crippling malware,” Tsai says.

For Advanced Disposal, this security focus is part of a larger overhaul that will include compliance efforts.

“We’ll focus on cybersecurity. We didn’t have a unified approach to these issues, so going forward, that’s an area of emphasis, as well as PCI and SOX compliance and ISO certification so that customers have an increased level of confidence that we’re secure,” Saunders says.

Bask Iyer, CIO of VMware and GM of edge computing at Dell and VMware, says security spending will be important, but more focused. Over the past few years, he says, security spending has grown exponentially and has resulted in a glut of proprietary, vector-specific tools that haven’t delivered the expected ROI.

“We’re hearing that the board and finance are getting weary of this area of the budget growing exponentially without a corresponding feeling that we’re actually more secure. It’s slowing down innovation in some respects, too,” Iyer says. “There’s pushback now and a need to focus on better tools, more technologically advanced solutions and fewer vendors. It’s about spending smarter and delivering greater effectiveness when we do spend.”

Budgets keep growing

Overall, 38 percent of organizations expect IT budgets to increase in 2019. These companies anticipate a 20 percent increase in IT expenditures on average, up from 19 percent in 2018. Only 6 percent of companies expect their IT budget to decrease in 2019, compared to 11 percent in 2018.

Companies with more than 5,000 employees are the most likely to see increased IT spending in 2019, with 56 percent of those organizations reporting expected IT budget growth.

“Our IT budget has been increasing year-over-year for the last two years,” Saunders says. “When I arrived at the beginning of 2017, we saw an increase of 9 percent from the previous year. From 2017 to 2018, the increase was 11 percent — that trend will continue for us.”

Iyer says that while overall IT budgets may stay flat year-over-year, allocation will shift to allow for greater tech spend in other departments. “If you’re doing the same thing in IT from one year to another, there’s no reason those budgets should increase — in fact, they should go down,” he says. “But what we’re seeing is that now finance, HR, marketing, all these other departments are looking at how to leverage technology to do their jobs better for the company, so they’re getting budget dollars allocated.”

Spending in the cloud

Software and cloud budget allocations are expected to remain steady year over year, at 26 percent and 21 percent respectively, while budget allocations for managed IT services are expected to increase a percentage to 14 percent of IT spending for 2019. Large enterprises, however, will see a slight bump in cloud spending in 2019, with the cloud accounting for 2 to 3 percent more of overall IT spend next year.

Here, online backup and recovery leads the way, with 15 percent of cloud services budgets being allocated towards this area, followed by email hosting (11 percent), online productivity (9 percent), and web hosting (9 percent).

Employee experience

Another area VMware’s Iyer sees poised for growth is in employee experience. That encompasses everything from single-sign-on to building access to helpdesk and ticketing services, all aiming to streamline the employee experience, he says.

“As enterprises, we focused so much attention and budget on back-end systems like ERP and CRM in the past, and it was like painting the Golden Gate Bridge,” Iyer says. “But now, we want to focus on end user experience. Things like, ‘I want to get a new laptop, open it up and have it set up, get my email and work perfectly without having to call IT.’ Or ‘I want my video conferencing to work flawlessly.’ Even physical access to buildings — in the consumer space, you can get an Uber, order lunch, make payments all with your mobile device. But why are we still using these outdated badge systems and things like that?”

These intelligent end user services are tied directly to employee experience (what VMware calls “colleague experience,” Iyer says). “When we look at employee surveys, one thing that’s consistently rated low is tools and systems. So we’re taking steps to address that, which also helps address talent and retention issues,” he says.

While many Silicon Valley firms offer perks like bikes, beer or on-site massage, Iyer believes that IT is one of the most important drivers for a positive employee experience, which then leads to greater engagement and retention.

“For those of us in the IT industry, sure, bikes and ping pong are great, but the most important thing we need to do our jobs is IT. You need your phone, your computer, everything to work,” he says. “People want to go to work for companies that care about people, and this is a very basic level of caring about people. They’ll sit on the floor to work, if they need to, as long as all their systems work flawlessly and they’re not hitting any avoidable pain points.”