Enterprise IT spending data shows that cloud, container, AI and automation initiatives have laid the foundation for a strong rebound in technology spending next year.
For how to carry out digital business transformation, 2020 is a hasty but effective proof of concept. CIOs report that overall, technology spending levels have either rebounded or will rebound in the near future, which indicates that technology spending in 2021 may be stronger than previously predicted by Wikibon.
In this article, Wikibon has updated the latest thinking on spending levels and priorities in 2021. Wikibon will also share the latest COVID in-depth research data from ETR.
A strong march towards digital transformation
Since the beginning of this year, Wikibon has been reporting a bleak outlook for 2020, that IT spending will fall by 4% to 5%. Although the third-quarter performance exceeded expectations, Wikibon sees no reason to change the direction of the big forecast. However, recent survey data and discussions with C-level executives have convinced Wikibon that growth in 2021 may exceed the 2% forecast, and this number may be as high as 4% to 5% in the next year.
A better understanding of how to use cloud computing, increase productivity, perform business transformation, and recent ETR spending data shows that accelerated digital business projects are paying off. Wikibon believes that the CEO and board of directors are willing to double their investment in digital business projects that have been successful in the past 10 months.
Wikibon's research shows that the various digital experiments brought by COVID to enterprises and government agencies have created a new momentum-CXOs hope to double the investment in the determined direction and further shorten the time to achieve results in the future. Wikibon believes that IT spending in 2021 will benefit from this.
CIO spending patterns show positive signs
Although the overall spending momentum in the ETR survey data is still flat compared to 2018 and 2019, the latest in-depth research has asked CIOs to make Wikibon optimistic. The figure below shows the answer to the question "When do you think the budget will return to the pre-COVID level?" that ETR asked CIOs in the November survey.
Historically, CIOs have always been conservative, so Wikibon focused on the upper end of the confidence interval. Although this may be an optimistic assumption, Wikibon believes that it reflects the earnings outlook announced by Microsoft, Dell, HPE, Cisco, AWS, and other major leading companies, as well as the unreported rise and repression that Wikibon believes exists in the global market demand.
Among the above data, the key data Wikibon sees is that only 4% of respondents believe that the level of expenditure will not rebound to the level before COVID within two years, and only another 20% believe that this situation will happen. It will happen after 2021. Reasonable people may argue that a large part of the survey still has a negative view of the outlook, and the northern hemisphere, including the world's largest economy, is about to usher in winter. But as the vaccine is about to come out, organizations have a clearer understanding of the upcoming digital economy and repressive spending in 2020. Wikibon believes that predicting the future has more advantages than disadvantages.
Tactical actions affect strategic focus
The figure below shows the results of an in-depth COVID investigation, which requires respondents to identify factors that contribute to business resilience during COVID-19.
Not surprisingly, the ability to work remotely has always been a key factor. 44% of respondents believe that business continuity plans are a key factor. However, several customers have told Wikibon that their business continuity plans are too focused on disaster recovery, so they have made tactical investments to strengthen their digital capabilities.
The flexibility of executives and budgets is considered the main factor. Wikibon believes that this is a real positive factor because both the executive office and the board of directors have turned to digital. They understand the importance of using digital technology "correctly" and believe that they have had good data in the past 10 months to understand Which digital technology investments will generate the highest return. Therefore, more funds will be used for digital projects. Many companies have strong balance sheets because some companies have already used corporate debt and took advantage of the low interest rate environment.
27% of respondents believe that the use of emerging technologies is a factor, some of which belong to the first type-remote work. Most importantly, Wikibon believes that the 10-month PoC from COVID enables organizations to act quickly in 2021 to further accelerate their digital transformation, fill gaps, and identify plans that will bring competitive advantage.
Containers, AI and RPA are driving a new round of innovation
Now, we want to better understand what technologies buyers are adding. Therefore, the "Newly Adopted" section has been added to the ETR net scoring method. Keep in mind that the net score focuses on the percentage of customers who adopt new technologies, increase spending, stay flat, reduce spending, and replace technology. The net score is calculated by (adopting new products + increasing spending)-(reducing spending + replacing), which is an indicator of the speed of spending.
The above table separately lists the "New Adoption" section to show this detail.
As shown in the figure, the three most important aspects of "new adoption" mentioned by the CIO are related to containers, ML/AI and RPA. Wikibon believes that four conclusions can be drawn from these data:
- Containers are driving the modernization of applications and enabling developers to increase productivity and agility.
- ML and AI are being applied to the massive amounts of data collected in the past decade. Organizations are trying to derive more value from the data and use machine intelligence to drive insights.
- Robotic Process Automation (RPA) As previously reported by Wikibon, the era of automation engineering has arrived and has been accelerated due to the COVID epidemic. Organizations are writing software robots to complete daily tasks and promote automation plans within the organization.
- As the CIO reported in a previous survey, these factors all lead to increased productivity.
CIOs double their investment in cloud business
In the previous picture, readers may find it strange...I have said so much about cloud computing migration, why the cloud computing score is not high? The following figure solves this problem. It shows the percentage of customers who use the ETR net scoring method and lists the areas where customers increase their spending separately.
Please note that the improvement level of cloud computing is 46%. This tells us that customers usually have adopted some type of cloud computing model and are doubling down on their investment. Once again, we see that container ML/AI and RPA are areas where customers increase their spending-more than 40%. There are several other areas that increase spending, such as databases, but 40% of spending is worth noting.
Factors to note
At the end of 2020, in addition to spending data, Wikibon will focus on four key factors:
- People's tendency to take refuge in place is increasing, especially after the new US government takes office. Wikibon is observing how this and fiscal stimulus will affect 2021. Although the further blockade is painful, it will be short-lived, and more preparations have been made this time. It is believed that this will create further suppressed demand and support the latest preconditions mentioned above.
- Wikibon firmly believes that in such a bad year, the glimmer of hope is to learn lessons. Speed and reaction to the unknown are now essential elements of success, and more so than ever.
- Wikibon believes that C-level executives will provide top-down support for digital technology. CEOs have seized the opportunity to take action and use COVID as a catalyst for change.
- Wikibon has not officially changed its outlook for 2021, and will wait until the next survey snapshot to evaluate the latest data. The current economic situation is still very bleak, but unlike those companies that have crossed the gap, the traditional business of traditional enterprises still does not have enough growth rate to offset the decline. In this new era, almost all enterprises must be digitalized (at least in some to the extend). Therefore, we see that leading industries are accelerating technology spending, and even those survivors who have been hit hard by COVID will give priority to technology investment.
Therefore, Wikibon believes that the growth rate of 2% in 2021 may double to 4% or higher. (Text/Cloud Technology Era)
[Original link: https://wikibon.com/breaking-analysis-cloud-containers-ai-rpa-support-strong-rebound-in-2021/]