The Hidden Trends Behind 2016’s “Flat” IT Budgets: A Closer Look at Buying Intentions

At face value, tech spending for 2016 is poised to remain flat., At least if you pay attention to several recent industry reports that predict little to no increase in IT capital expenditure for next year. That might be important information for an overall economic forecast, but it doesn’t give the full picture of what’s really going on in technology. In fact, the industry is radically transforming based on metrics that show value and Return on Investment (ROI).

Imagine a broad river or tidal bay that looks relatively calm at a glance, yet has strong currents and undertows just beneath the surface. That more accurately describes the current state of the tech industry. While overall tech budgets may not be increasing by much, where businesses are investing is changing significantly.

At Nucleus Research we’ve just released our Buying Intentions Surveys, which provide a clearer picture of the shifts and currents in technology beyond a superficial glance. IT spending on analytics, for example, is poised to increase 36 percent in 2016. We weren’t surprised that businesses would continue to invest in analytics given the great insight and value these apps deliver, but the huge jump is impressive. This is an area to watch.

CRM continues to deliver value as businesses focus more on the customer experience. We see an increase of 22 percent in IT spend next year. The supply chain remains a strategic focus for many businesses too, with IT spending set to increase by 14 percent.

And businesses are starting to focus more on Human Resources, with a projected spending increase of 17 percent for Human Capital Management (HCM) solutions in 2016. The move to cloud HCM is driving this, along with an integration of HCM with Workforce Management and accounting/payrolls solutions into a single application.

In fact, cloud computing plays a major role in the flat overall IT spend projections for next year. We have approached the tipping point where cloud solutions are pervasive and even status quo. Capital expenditures have been driven down, allowing businesses to concentrate their budget on solutions that deliver real value. This is bad news for hardware manufacturers, where everything from data center servers to devices is increasingly commoditizing. It’s also not good for software solutions that were once assumed to be critical but are now fumbling to provide value. I wouldn’t want to be a Unified Communications company or an email provider today.

Bottom line, businesses are getting smarter in how they invest in technology and honing in on strategic solutions that deliver value. The flat overall IT expenditure prediction that many are touting belies this trend. We are no longer mired in a deep recession, so IT budgets are not flat out of dire necessity. The predominance of the cloud has kept costs down and allows businesses to focus on technologies that prove strong ROI. And that is driving better productivity with more efficiency – all at an industry-cumulative IT budget that remains largely flat.

Lesson: It’s not how much you are spending, but what you are spending it on!