IT companies prepare for recession with budget cuts

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IT companies around the world are mentally preparing for a recession as annual inflation remains stable at around 8% and interest rates rise. In the midst of this development, a number of IT companies are expected to cut their budgets, while the majority of companies will increase their technology budgets.

“In hard economic times, you would expect companies to pull back and you would expect those pullbacks to include IT. The big surprise is that spending on IT is expected to increase even among companies that are actively cutting back elsewhere to prepare for a recession,” said Peter Tsai, senior technology analyst at Spiceworks Ziff Davis.

With some of these companies still facing labor shortages, hiring is unlikely to decline, with about a third of IT departments expecting to hire more tech workers in 2023. According to Tsai, firms plan to increase spending on cloud-based and on-premises managed tech services to offset the hiring slowdown.

Cloud investment, which accounted for 26% of the total IT budget in 2022, will grow more slowly by 23% in 2023 due to inflation, but it ranks lower than infrastructure upgrades, higher priority for IT projects, employee growth, and increased security concerns.

Companies that cut costs seem to be fixated on technology as a safe haven against economic instability, as companies seem to be cutting back in other areas to increase their IT spending.

The sources for this piece include an article in CIODIVE.

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