Breaking Analysis: Cloud Momentum & CIO Optimism Point to a 4% Rise in 2021 Tech Spending
Channel: SiliconANGLE theCUBE
Date: 19/12/2020

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https://siliconangle.com/2020/12/19/cloud-momentum-cio-optimism-point-4-rise-2021-tech-spending/Cloud momentum and CIO optimism point to a 4% rise in 2021 tech spending

BREAKING ANALYSIS BY DAVE VELLANTE

A range of new data now suggests that tech spending will be higher than we previously thought for 2021.

COVID-19 learnings, a faster-than-expected vaccine rollout, productivity gains and broad-based cloud leverage lead us to raise our outlook for next year. We now expect a 3% to 5% increase in 2021 technology spending, roughly double our previously forecasted growth rate.

In this Breaking Analysis we’ll share new spending data from our partners at Enterprise Technology Research and take a preliminary look at which sectors and companies are showing momentum heading into next year.

 Data points to a strong 2021 rebound
The latest data from ETR and theCUBE community suggests that the accelerated pace of the vaccine rollout, pent-up demand for normal operations and learnings from COVID will boost 2021 tech spending higher than previously anticipated.



A key factor we’ve cited is that the “forced march” to digital transformation due to the pandemic, created a massive proof of concept for what works and what doesn’t in a digital business. CIOs are planning to bet on those sure things to drive continued productivity improvements and new business opportunities.

Speaking of productivity improvements, nearly 80% of respondents in the latest ETR survey indicate that productivity either stayed the same or improved over the past three months. Of those, the vast majority (more than 80%) cited improvements in productivity. This has been a common theme throughout the year and points to continued remote work structures being the norm for large swaths of employee populations.

Remote workers are more productive
That said, the expectation among CIOs is that many workers will return to the office in the second half of the year. We expect that to drive new spending in the infrastructure needs of company headquarters, which have been neglected over the past 10 months.

Despite the expectation that many workers will return to the office, 2020 has shown us that working remotely is here to stay for a much larger number of employees than was the case pre-pandemic. ETR survey data shows that number will approximately double over the longer term.

As well, cloud computing became a staple of business viability in 2020. Those that were up the cloud adoption ramp benefited greatly. Those that weren’t, learned fast. Along with remote work, cloud necessitated new thinking around network security and, as we’ve reported, identity access management, endpoint security and cloud security were the beneficiaries. Companies such as Okta Inc., CrowdStrike Holdings Inc. and Zscaler Inc., among others, continue to ride those waves. Larger established companies such as Cisco Systems Inc., Palo Alto Network Inc., F5 Inc., Fortinet Inc. and others have major portions of their business that are also benefiting from the shift in network traffic.

Now despite all the momentum in the market and the expected improvements in 2021, these tailwinds are not expected to be evenly distributed — far from it. We expect the fourth quarter to remain soft relative to last year and first-quarter 2021 will be flat to up slightly. Remember, the COVID impact was definitely felt in March based on the earnings we saw so there may be upside in Q1 given that organizations are still being cautious in Q4.

Steady improvement throughout the year
The chart below shows the responses to key questions around spending trajectories from March, June, September and December of this year.



It’s no surprise that there has been little change in the percent of companies reporting that workers are remote and business travel has been limited. But look at the other categories. We’re seeing a dramatic reduction in hiring freezes. The percentage of companies freezing new information technology deployments continues to drop.

Conversely, the percentage of companies accelerating new IT deployments is sharply up to 34% from the March low of 12%. And look at the headcount trends. The percentage of companies instituting layoffs continues its downward trend, while accelerated hiring is now up to 17%.

So there’s a lot to be excited about in these results.

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As always, we really appreciate the comments on our LinkedIn posts. You can always email david.vellante@siliconangle.com and DM @dvellante on Twitter. Also, you may want to check out this ETR Tutorial we created, which explains their spending methodology in more detail