With possible recession looming, IT pros plan spending adjustments

Facing what they perceive as an inevitable recession, IT planners are moving ahead with infrastructure investment but also calculating how to shift priorities if spending cuts become unavoidable, according to monthly surveys by IDC.

Roughly 81 per cent of respondents expect their spending to stay the same or increase for 2023, despite anticipating economic “storms of disruption." The results are based on surveys conducted in November and December 2022 of more than 800 IT decision makers in North America, Asia Pacific, and Europe.

Cloud spending is increasing, and an IDC Quick poll of 69 CIOs from its global CIO Executive Council conducted in December found two-thirds of them are already spending more on cloud services than they budgeted.

The two studies are cited in the IDC report “Early 2023 Cloud Budget Outlook: Aligning IT Spending with the Business Conditions” published this month.

Among the ways that same group is looking at optimising their cloud spending this year, two approaches came out on top: first, enhancing their cloud sourcing and vendor management, and second, reducing their spending on cloud infrastructure.

What IT will do to control costs

To deal with the potential budget challenges of a continuing recession, IDC expects enterprises to respond in three phases, with strategies to address both tech projects and IT FinOps in order to get the most value out of their cloud spending.

Initially, they will immediately delay starting up new technology projects if they won’t show a return on investment within 12 months. On the FinOps side, they will also try to optimise pricing and discounts in their contracts with vendors, as well as extend current IaaS and SaaS contracts to lock in price certainty, IDC expects.

In the second phase, the expectations include shifting IT spending from projects that are in their “run” phase to new projects that have a projected ROI within 12 months. 

FinOps action includes dropping under-utilised IaaS resources and optimising how much IaaS enterprises commit to consume. It will also include eliminating duplicate SaaS functionality, IDC expects. This will happen during the first half of this year.

In the second half of the year if a recession warrants it, enterprises will enter the third phase of spending adjustments that will have an impact in 2024 and beyond. 

They will prioritise automation projects to reduce both consultant and in-house IT staffing, according to the expectations. And their FinOps strategies will optimise cloud costs through decisions they make about locating workloads and cloud architecture.

In IDC’s Quick poll, respondents said the areas most immune to cuts would be security, data and analytics, infrastructure and operations, and customer experience, according to Rick Villars, IDC’s group vice president of worldwide research, and lead author of the IDC spending report.