The Annual Report on IT Budgets and Tech Trends
State of IT 2021
The 2021
State of IT
A Global Crisis Brews Up
Big Changes in IT
What a difference a year makes! Since the previous edition of The State of IT — our annual report on IT budgets and tech trends — splashed onto the scene, much has changed. First of all, Spiceworks joined forces with Ziff Davis B2B, bringing together two powerhouses steeped in IT knowledge and tradition to form the trusted global marketplace that connects technology buyers and sellers.
Even more consequential, the ongoing COVID-19 pandemic caused uncertainty and profound shifts on a global level. In addition to immense human health impacts, this crisis has presented challenges for companies around the world, introducing economic instability and compelling more than half of businesses to have employees work from home.
During this rapid rush to remote work, IT departments everywhere rapidly deployed technologies to maintain business continuity during the global health crisis. The massive move to work-from-home policies spurred shifts in hardware, software and services spend, and will continue to make waves as many companies stick to flexible working arrangements permanently.
To gain perspective on how this great shift will influence IT in the coming years, SWZD surveyed more than 1,000 technology buyers in companies across North America and Europe. To provide context into the magnitude of the shifts expected in 2021, our report often tracks tech trends over a 3-year period. Our study also includes business-level intent data, which provides insights into the online activity of decision-makers looking to buy a range of technologies, from security to workplace communications tools, to end user hardware… and beyond.
Key Findings
- COVID-19 is a catalyst for business transformation: 76% of businesses plan on long-term IT changes.
- These transformation plans drove tech spending in 2020 and more than a third of 2021 budget increases will be influenced by COVID-19.
- Overall IT budgets are expected to decline slightly year-over-year in 2021, but 80% of businesses still anticipate tech spending to stay the same or increase.
- Businesses expect to increase cloud and managed services spending in 2021, and Hardware spending in 2021 is expected to decline.
- Plans to adopt emerging tech have dropped significantly in 2021, as IT buyers deprioritize cutting-edge features in favor of more pressing needs.
COVID-19 has driven businesses around the globe to transform to enable remote workforces, adopt digital workflows, optimize business operations, and innovate to meet the needs of a new market. Many of these changes will be permanent and will continue to influence tech purchases in 2021.
Among all businesses, 64% enabled a remote workforce in 2020 and more than half of all companies plan to retain flexible work policies even after the pandemic ends — which will necessitate additional technology investment. Because the remote work revolution wouldn’t be possible without modern communications technology, many decision-makers increasingly view tech investments as essential for maintaining productivity levels and business continuity… even when businesses cut back in other areas.
Business plans resulting from COVID-19
44% have already or plan to accelerate digital transformation
33% plan to improve security, risk, &
governance
30% plan to develop training aids to support remote employees
36% plan to improve IT operations & systems performance
32% plan to connect employees using standardized, secure, and easy-to-use tools
27% plan to refine disaster recovery plans to account for additional scenarios
SECTION 1
Technology Buyer Insights at a Glance
A selection of real-time insights during the 2020 rush to remote work
Even with uncertainty swirling over the next year, there will be ongoing opportunities for technology vendors and service providers to identify and reach IT buyers in-market for infrastructure, software, and services to empower a remote workforce.
As the situation on the ground evolved rapidly during the initial phases of the COVID-19 crisis and businesses began their transformation journeys, we saw interesting shifts in activity as millions of IT buyers generated intent signals as they visited SWZD properties. From the initial rush to remote work leading to a flood of interest in communications tools, virtual desktops, firewalls, and network monitoring tools in March, to the focus on infrastructure enhancements in April and securing remote workers in June… we had a prime seat to observe which products and technologies businesses were interested in at a given moment in time.
Notable month-over-month buyer intent signal changes: Behavior shifts during the COVID-19 crisis
Increase in Signal Volume (Top 7 Segments)
For IT brands, these monthly behavioral trends represent the opportunity and ability to target in-market buyers with relevant marketing messages while they’re actively researching specific technologies.
Tech marketers, contact us to learn more.
Business Revenue and Tech Spend in 2021
Going into 2019 and 2020, the majority of organizations were optimistic about future business prospects. However, overall company revenues are expected to stagnate in 2021 due to slowing economic activity resulting from the global pandemic.
While one-third of businesses expect revenues to increase year-over-year from 2020 to 2021, that figure is down significantly from 58% expecting revenue growth between 2019 to 2020. Additionally, 31% of organizations believe revenues will decrease YoY from 2020 to 2021, representing a significantly more negative outlook than in the previous two years, when only 7% of businesses expected revenues to fall.
Expected Total Company Revenue Change
Notable revenue trends for 2021, by geography:
41% of U.K. businesses expect overall revenues to decrease
Notable revenue trends for 2021, by industry:
51% of businesses in the financial services sector expect revenues to increase
50% of educational institutions expect overall revenues to decrease
Despite Uncertainty, IT Budget Growth Continues
As revenues stagnate, one might expect IT spending to get watered down. While year-over-year growth has slowed a little, more IT budgets are expected to grow than contract in 2021. In fact, 80% of businesses in North America and Europe anticipate year-over-year tech spending to stay the same or increase (33.3% increase vs. 46.3% stay the same).
Meanwhile, 17% of organizations expect IT budgets to decline in 2021, which is significantly more than the 8% of organizations that expected budget decreases in 2020. North American businesses are significantly more likely to report decreases in IT budgets than their counterparts in Europe (21% vs. 12%, respectively).
Expected IT Budget Change (over prior year)
80% of businesses surveyed expect IT budgets to grow or stay steady over the next 12 months.
Consideration: Our survey was conducted among IT pros employed in June and July 2020, so the economic metrics reported may not fully account for financial implications of companies that closed permanently or eliminated IT staff.
SECTION 2
Factors Shaking Up
IT Budgets
Even amid uncertainty, many businesses will focus on IT spending. Just as in previous years, updating outdated IT infrastructure will continue to be the top factor driving IT budget increases — cited by 56% of organizations planning on growing IT spend — followed by an increased priority on IT projects (45%) and escalating security concerns (39%).
Unsurprisingly, the coronavirus pandemic will also influence tech spending in a major way in 2021. Among organizations increasing budgets in 2021, 38% cite changes to business operations due to COVID-19 as a reason to increase spend, with 36% citing the need to support a remote workforce during the ongoing crisis.
Employee growth, which was anticipated to be one of the top drivers of budget increases in 2020, is expected to have significantly less influence on spending increases in 2021, as the pandemic puts a lid on hiring in many organizations.
In 2021, budget drivers will vary by company size. For example, the need to upgrade outdated infrastructure will be the top factor contributing to increases in IT spending among small and mid-size businesses (1-999 employees). An increased priority on IT projects is the top factor influencing IT budget growth in enterprises (1000+ employees) — at a rate significantly higher than in small and mid-size businesses — likely because enterprises are more likely to have experienced changes to their business operations causing them to re-prioritize tech investments to support their needs.
Additionally, mid-size businesses (100-999 employees) and enterprises are significantly more likely than small businesses to increase budgets in 2021 due to supporting a remote workforce during COVID-19, and enterprises are significantly more likely than small businesses (1-99 employees) to increase budgets due to changes in business operations during COVID-19, changes in regulations, and/or a recent security breach.
SECTION 3
IT Budget Breakdown
Sifting through the tech spending mix
For the 2021 State of IT, Spiceworks Ziff Davis surveyed more than 1000 IT decision-makers to understand how business technology budgets will be allocated across hardware, software, cloud services, and managed IT services.
While hardware will still account for the largest slice of IT spending in 2021, hardware budgets as a percentage of total IT budgets have dropped significantly in the last two years — from 35% in 2019 to 31% in 2021. As in previous years, software represents the second biggest IT spending category, remaining steady as a percentage of overall spend YoY.
Over the last two years, money allocated to hardware budgets has slowly flowed into other areas. Hosted/cloud services will account for 24% of IT spending in 2021 (up significantly from 21% in 2019) and managed services spend will account for 16% of spend (up significantly from 14% in 2019).
Expected IT Budget Allocations
% of total IT budget
Of note, the recent push to remote work has energized cloud spending. According to our research, 35% of organizations have either already migrated or plan to accelerate migration of workloads to the cloud due to COVID-19.
Directionally, our data indicates that in 2021, SMBs (1-999 employees) anticipate spending a greater percentage of their IT budgets on hardware and software than enterprises. Conversely, enterprises (1000+ employees) will allocate a greater portion of IT budgets than SMBs to hosted/cloud and managed services.
On a regional basis, North American businesses spend a significantly greater proportion of IT budgets on software than European businesses, which spend significantly more on managed services than their counterparts across the Atlantic.
Detailed View into Hardware Budgets
Diving deeper into hardware spend, the greatest portion of hardware budgets will go towards laptops, desktops, and servers in 2021. Additionally, the push towards remote work has accelerated the shift towards more portable devices with many businesses making recent investments in laptops.
Over the last two years, desktop spending has dropped from 18% of hardware budgets in 2019 to an expected 14% in 2021. Additionally, businesses expect on-premises server spending to decrease significantly YoY — from 14% of hardware budgets in 2020 to 12% in 2021 — as some businesses shift infrastructure to cloud services.
Spending on security appliances is expected to account for 7% of hardware spend in 2021, up significantly from 5% in 2019. Enterprises (1000+ employees) will spend proportionally more, putting 9% of their hardware budgets towards security appliances — significantly more than SMBs.
Hardware Budget Break Out
% of total IT HW budget
Other hardware spending plans are expected to vary depending on company size.
Enterprises are expected to spend significantly greater portion of IT budgets on security appliances and power and climate than SMBs. Small businesses will allocate a significantly greater percentage of their hardware budgets towards laptops. On average, the smallest companies plan to spend 24% of their hardware budgets on laptops, compared to 13% among enterprises, who split their IT budget across more categories. Similarly, North American businesses will spend significantly more on laptops than their counterparts in Europe.
Detailed View into Software Budgets
Within the on-premises software category, we noticed big year-over-year shifts. While operating systems accounted for the largest chunk of software expenditure in 2020, there won’t be any major end-of-service events in 2021 to drive new purchases.
As the business world plans to continue supporting a remote workforce for the foreseeable future, productivity software is expected to be the biggest software spending category in 2021, accounting for 12% of spend, up significantly over a two-year period.
When pouring over trends by company size, the smallest businesses will allocate significantly more of their software budgets towards industry specific apps — such as those catering towards education (i.e., distance-learning tools) and healthcare (i.e., electronic medical records systems) — and productivity software.
And with many enterprises (1,000+ employees) looking to support a physically distributed workforce, larger companies will spend a greater percentage of their software budgets on communications software (8%) than SMBs (5%).
On a regional basis, North American businesses will spend a significantly greater proportion of 2021 IT budgets on productivity software, industry-specific apps, and business support apps than organizations in Europe. On the other hand, businesses in Europe will spend significantly more in 2021 on virtualization and communications software than companies in North America.
Software Budget Break Out
% of total IT SW budget
Detailed View into Software Budgets
Over the past 2 years, cloud budgets as a percentage of overall IT budgets have seen a 3 percentage point increase while hardware budgets in North America and Europe have contracted by 4 percentage points.
Growth in the cloud category over the last 2 years has energized adoption of productivity apps, cloud storage, and communications solutions — which are all relevant in a world where working from home is the new normal. However, in 2021, online backup and recovery solutions and online productivity software will continue to hold the top spots in hosted/cloud services spend.
We can directly attribute some of the expected growth in cloud spending to business transformations connected to the coronavirus crisis:
17% of businesses plan to move to an “as-a-service” model or remove fixed-capacity costs due to COVID-19
35% of organizations have or plan to accelerate migration of workloads to the cloud due to COVID-19
Hosted/Cloud-Based Services Budget Break Out
% OF TOTAL IT CLOUD BUDGET
After analyzing 2021 cloud spend data by company size, we found that larger companies will continue to allocate a greater portion of their budgets towards platform-as-a-service and desktop-as-a-service solutions than smaller companies.
From an industry perspective, IT services — often viewed as an early adopter — will allocate 32% of their overall technology spend towards cloud budgets (significantly higher than the 24% average among all industries) and 11% of cloud budget towards Infrastructure-as-a-service in 2021 (directionally higher than the 6% average among all industries).
Detailed View into Managed Services Budgets
Managed hosting, managed storage/backup, and managed hardware support will account for the biggest portions of managed services spend in 2021.
Additionally, with heightened security concerns as more employees work from home than ever before, managed security services will take the number 4 spot in managed services spend. Also, with businesses shifting towards cloud services, managed cloud infrastructure rounds out the top 5 managed services spending areas.
Looking at company size, the smallest businesses will allocate a greater proportion of managed services budgets towards managed hosting than mid-size businesses and enterprises. Enterprises will allocate a greater percentage of their budgets (10%) towards managed cloud infrastructure than the smaller companies (7%).
Managed Services Budget Break Out
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Managed Services Budget Break Out
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% of total IT Managed Services budget
Other Factors Influencing IT Spending
We’ve already given you a sense of how the global pandemic has stirred up IT budget plans in 2021. Apart from the crisis, many top factors pushing businesses towards purchasing new hardware, software, and services remain the same. In general, technology end of life, upgrade/refresh cycles, and company growth will continue to be the biggest drivers of new technology investments in 2021.
At the same time, amid economic uncertainty at the time this survey was fielded, the number of businesses pointing towards budget availability being a purchase driver decreased substantially in 2021. And with some budgets being reallocated to fund urgent remote work enablement initiatives, businesses won’t be as likely to adopt emerging technologies next year, nor will they be as tempted to upgrade hardware or software due to the availability of new features.
IT Purchase Drivers
Looking at company size, compared to enterprises, small businesses are more likely to purchase new technologies due to end of life events, as they often don’t have the luxury of replacing systems following regular upgrade or refresh cycles.
This year, enterprises — with their sizable workforces, now largely working remotely and in some cases using unfamiliar technologies — are more likely to be swayed by the need for better customer support.
On a regional basis, North American businesses are significantly more likely than European businesses to purchase new technology due to end of life, upgrade/refresh cycles, growth/additional need, project need, end-user need, and budget availability. European businesses are significantly more likely to buy new tech because of the need for better customer support and the need for better tech expertise than their North American counterparts.
SECTION 4
Future Tech in the
Workplace
Some businesses may be losing their taste for cutting-edge solutions
In last year’s State of IT report, businesses were energized and looking forward to adopting 5G, hyperconverged infrastructure, edge computing, blockchain technology, and artificial intelligence technology.
However, in 2021, emerging tech adoption plans will cool off considerably, with many organizations grappling with optimizing existing operations to support a remote workforce — instead of trying to take on experimental projects that might not offer immediate return on investment. As a result, although overall 2021 adoption rates are expected to be up over a two-year period, we’re seeing YoY declines in plans to use most emerging technologies.
There are, of course, exceptions to the rule. Large enterprises, which tend to place a greater priority on IT due to access to more resources than SMBs — which could also better insulate them from economic uncertainties — are adopting some emerging technologies at up to 5x the rate of small businesses within the next two years, as is the case with blockchain — 9% adoption among small businesses (1-99 employees) vs. 53% among large enterprises (5000+ employees). Additionally, large enterprises will adopt IT automation technology, virtual reality, edge computing, container technology, 5G, VDI, 3D printing, IoT, AI, converged/hyperconverged infrastructures, serverless computing, and gigabit Wi-Fi at significantly higher rates than small businesses.
Technology Trends Implemented or Planned Within 2 Years
Adoption of Technology Trends
Adoption of Technology Trends By Company Size
On a regional basis, European-based businesses expect to adopt emerging technologies at a significantly higher rate than North American counterparts. One big reason for these differences could be the relative lack of budget cutbacks in Europe: 85% of European businesses (vs. 75% in the U.S.) said they either increased or didn’t change IT budgets between 2020 and 2021.
Emerging Technology Adoption by Industry
On the industry level, there are also instances where certain verticals buck overall adoption trends. 3D printing — which is appealing for prototyping and teaching use cases — enjoys a significantly higher current + planned adoption rate in education (67%) and manufacturing (45%) than in other industries. Additionally, blockchain enjoys a significantly higher-than-average 43% current + planned adoption rate in the food/beverage/hospitality/travel industry, with the technology possibly fueling loyalty programs and tracking touchpoints in a food supply chain.
The financial industry has economic incentives to use emerging technologies to gain a competitive edge. With blockchain famously being sold as a tool to securely track monetary transactions, 38% of financial services organizations plan to use the technology within 2 years, well above the 26% average adoption rate among all businesses. Adoption rates among financial services companies also rise above the adoption curve for IT automation, artificial intelligence, and serverless computing.
Also, IT services firms — whose business is to advise companies on technology decisions or provide technology services — are early adopters of serverless computing, with a planned 45% adoption rate by 2022 (compared to 35% among all businesses).
Bright spots in Emerging Tech Adoption
While enthusiasm for most emerging technologies has slowed in the last year, there are a couple of notable technologies that will continue to see increased YoY adoption, despite, or perhaps because of changes connected to COVID-19.
When we released our pre-pandemic 2020 State of Virtualization Report, 44% of organizations were using or planning to use desktop virtualization — which can be useful for securing data accessed by remote workers — by the beginning of 2022. Now well into the COVID-19 crisis, our latest findings show these figures holding steady or even growing slightly, with 46% of businesses using or planning to use VDI by mid-2022.
Additionally, 26% of businesses indicated they are planning to increase VDI deployments specifically because of new needs that have surfaced due to COVID-19 (when we asked them directly).
The other area poised for growth within the next two years is in emerging security solutions. The massive shift to remote work has seen employees around the globe taking corporate devices and data outside of the relatively safe confines of corporate networks. This has sparked many concerns, particularly regarding endpoint device security, vulnerability management, detection of security events, and security incident response.
Endpoint device security is the top concern IT pros have for their remote workforce.
Areas of Concern for Remote Workforce
In this new threat environment, adoption of a wide range of newer security solutions are expected to rise. Within the next two years, we expect to see significant growth in the adoption of employee security training tools, anti-ransomware solutions, hardware-based authentication, breach detection systems, cloud workload protection, and security solutions powered by artificial intelligence (AI).
And once again, as with other emerging technologies, Europe will be slightly ahead of the curve. For example, 47% of businesses in Europe plan to use security solutions powered by AI/machine learning within 2 years, compared to only 32% in North America.
Emerging Security Solutions Implemented or
Planned Within 2 Years
SECTION 5
Implications for Tech Marketers in 2021
For tech marketers, the trends outlined in this report present opportunities to help businesses navigate change. As funding shifts from one area into a new one, organizations will need help selecting solutions that fit their needs, and they will turn to trusted advisors to help lead the way.
Specifically, in the near future, many IT departments will be tasked with addressing new security concerns, enabling more seamless communications between physically distant coworkers, migrating workloads to the cloud, and updating disaster recovery plans to account for new scenarios.
However, with the increased workload that comes with supporting remote workers — in addition to their existing responsibilities — it’s getting harder to reach IT buyers through traditional channels.
In the absence of in person meetings and conferences, and with fewer remote decision-makers having access to phones, digital marketing will be more important than before. The good news for marketers is that virtual events will be appealing for the foreseeable future, as many IT buyers look to connect with vendors and peers during the pandemic. According to our data, 55% of IT buyers expect attendance of virtual events to increase over the next 12 to 24 months, and the majority of IT buyers also said they’ve attended more virtual events than they did before COVID-19.
Statement Agreement on Technology Conference Attendance
In our new environment, marketers should adapt to stay competitive. IT buyers can purchase similar products through any number of channels, which leads to increased competition. To connect better with prospects, tech brands need to better understand buyers’ challenges.
Currently, IT departments have very specific pain points and needs as they navigate their way through this particular point in time. Luckily, tech brands now have the ability to target in-market buyers as they’re actively searching for solutions, with cost-effective marketing tactics. Marketers can now easily improve conversion rates through the promotion of key informational assets to the right audiences, leveraging digital events as part of a larger digital marketing portfolio.
Conclusion
In 2021, corporate revenues are expected to level off or decline, due to economic uncertainties caused by the COVID-19 crisis. However, with the pandemic driving new business needs, while down compared to previous years, 80% of IT budgets will either increase or stay the same between 2020 and 2021.
Because information technology will play a vital role in effectively connecting and securing a remote workforce, organizations will need to continue investments in hardware, software and services to maintain productivity amid the remote work revolution.
The COVID-19 crisis prompted unplanned spending among many organizations to meet those remote enablement needs in the first half of 2020. However, as organizations take cost cutting measures during the pandemic, over the next 2 years, many smaller businesses plan to divert funds once marked for deploying cutting-edge technologies in the workplace.
In the near future, the usual purchase drivers including the need to update outdated infrastructure, increased priority on IT projects, and escalating security concerns will continue to fuel spending. However, with more than half of companies planning to adopt flexible work policies even after the COVID-19 crisis ends, the “new normal” of employees working from anywhere will alter IT spending patterns going forward.
In this environment, IT vendors can better serve organizations’ unique IT needs by listening to the needs of businesses, identifying decision-makers interested in their products, then reaching out to organizations that need help at the right time, and with the right messages.
Ready to reach businesses in-market for your tech solutions? Contact Us
Methodology
The Spiceworks Ziff Davis survey was conducted in July 2020 and included 1,073 IT buyers from organizations across North America and Europe. (Data was also collected in APAC and will be reported separately since it cannot be trended with previous waves.)
The distribution of IT buyers surveyed is nearly identical to last year’s survey, so the data reveals true market shifts. The study also includes SWZD intent signal data collected monthly in 2020, based on the purchase signals generated by IT buyers on SWZD properties.