IT budgets rise despite Corona pandemic
Despite the Corona pandemic and uncertain economic outlook, IT budgets continue to rise in the coming year, albeit at a slower pace than last year. Forecasts for 2022 are also positive, but more uncertain for both years than twelve months ago. Nearly nine out of ten organizations are currently focused on expanding digitization and prioritizing it for 2021, according to preliminary results from Capgemini's IT Trends Study, in which 144 IT and business leaders from large enterprises and government agencies in Switzerland, Germany and Austria participated in September and October.
The vast majority of companies and public authorities are pushing ahead with digitization during the pandemic: it remains the top priority for 2021 as well. That about sums up Capgemini's IT Trends Study 2021. Almost half of the respondents (48.4 percent) said their company plans to increase its IT budget in 2021; twelve months earlier, 63.1 percent still intended to spend more money. For around 27 percent, IT budgets for 2021 will remain at the previous year's level. That is a good 5 percent more than a year ago. Only just under 15 percent of respondents will reduce IT spending. This proportion is unchanged, but the cuts are more drastic than before. The sectors most affected are those that are currently subject to restrictions or are facing fundamental challenges. 9.4 percent of the study participants abstained.
This means that the Corona pandemic is only having a limited negative impact on IT spending. This is because 87 percent of companies and public authorities are using it as an opportunity to expand digitization. After the waning interest in the previous year, it is once again at the top of the priority list for 2021, followed by efficiency enhancement, cost reduction and the development of new IT products and services. Alignment with the needs of end customers has become more important for many organizations and now ranks fifth.
Projects stopped or postponed
Almost 55 percent of respondents reacted to the uncertain economic situation by shifting budgets. Around 25 percent have stopped IT projects, while 42 percent have postponed the start of projects into the future. Almost three-quarters of the postponed projects are expected to start in the coming year. Of the stopped projects, nearly half are expected to continue in the coming year. 18 percent of the study participants have brought forward IT projects. Of these, however, almost one-third are not expected to be completed.
Guido Kamann, Head of Capgemini in Switzerland, explains: "Since the outbreak of the pandemic, companies and public authorities have been increasingly pushing digitalization in order to maintain operations in the new situation with lockdown and longer-term restrictions. There was a need to quickly enable or expand working from home, as well as contactless service and online sales. As part of this, information evaluation and use, shorter release cycles and partner networks became more important, while less attention was paid to flexibility and efficiency."
Expenditure on system maintenance still high
On average, CIOs invest 27 percent of their budget in modernization and around 26 percent in new applications and systems. Expenditure on maintaining existing systems remains high at just under 47 percent. Large corporations have the lowest costs in this area, while midsize companies have the highest. The midmarket pro rata obtains fewer services from provider clouds, which possibly leads to higher fixed costs. Another factor could be the lower level of automation in the last 12 months compared to corporations. As a result, SMEs are currently able to invest less money in modernization and new developments than corporate groups.
IT budgets: Reducing the cost of what already exists
"IT budgets have increased almost permanently in recent years, but the proportions of spending on existing IT and new have hardly changed. To gain financial leeway, companies and public authorities should reduce their costs for the existing - for example, through automation and other innovations. Then they can respond more easily to market changes and develop their business models in a more visionary way," comments Guido Kamann. However, only individual organizations or industries are currently succeeding in implementing the principle of cost reduction through innovation.
Source: www.capgemini.com/ch-en/.
