Tech spending has remained surprisingly stable in 2023
But many enterprise startups are having a rough time
As 2022 edged to a close, we took a look at 2023 budget projections. As we approach the middle of the third quarter, we thought it would be useful to revisit those predictions and see where we are almost eight months into the year.
It’s always good to start with the analysts and see what numbers they are seeing. They talk to CIOs constantly and have their finger on the pulse of spending.
First some context: In October 2022, Gartner predicted 2023 IT spending would grow by 5.1%, while IDC was similarly predicting between 5% and 6%. By January, the firms had already revised those numbers, with Gartner predicting just 2.2% in real numbers with IDC dropping its estimate to 4.4%.
These numbers don’t happen in a vacuum, of course. We keep hearing that the economy is bad. Heck, just last week the Fed raised interest rates yet again in an effort to tame inflation, which has plunged to 2.97% this month per YCharts. In other words, the Fed’s medicine seems to be working, and maybe it’s time to stop.
Meanwhile, at the end of last year, we were seeing strong currency headwinds with a particularly strong dollar wreaking havoc on companies’ revenue numbers. Those headwinds have mostly dissipated, according to Gartner analyst John-David Locke. “Now IT spending is 4.4% in constant currency and 4.3% for the U.S. dollar. So the U.S. dollar is actually pretty much stabilized against most currencies,” Locke told TechCrunch+.
As for IDC, it’s right in the same ballpark with 4% growth. IDC analyst Stephen Minton blames the PC market rather than SaaS or cloud infrastructure spending cuts for the dip we’ve seen to this point. “So instead of 5% or 6%, we’re on course for about 4% growth. That’s mostly because of the PC market. So the PC market has performed pretty abysmally for the first half of the year,” Minton said.
CIOs we spoke with back in December talked about surgical cutting, such as tools they double up on, but cutting is sometimes harder than it appears. VCs also talked about a more difficult landscape for startups. We wanted to know what they’re seeing now.
Best-laid plans
When we spoke to some CIOs last year, they were looking more carefully at how they were spending money. Sharon Mandell, CIO at Juniper Networks, has been looking closely at costs and cutting where it makes sense without affecting key strategic initiatives. That’s in line with what she told us last fall. In fact, Mandell says the company has trimmed the budget by $1 million in the first half through careful cutting, so that would project out to $2 million in savings if she could keep it going. That’s for a company that made over $5 billion last year and reported earnings of $1.4 billion for the quarter last week.
