‘Crisis’ mode sparks increased IT spend

Published on the 28/01/2021 | Written by Heather Wright

Crisis tech buying

Stressed and in crisis mode, companies look to IT and side hustles…

Local businesses are gearing up for increased IT spend this year, as they try to reshape and secure their businesses – which for many SMBs are in ‘crisis’ or ‘survival’ mode.

New reports from both Gartner and IDC paint a picture of companies looking to technology to help in the year ahead. But while the picture might be rosier for IT vendors, the reports also hint at a darker side, with the pandemic and its accompanying lockdowns and work from home directives exposing shortcomings and forcing the increased spend – and with 60 percent of SMBs in an IDC A/NZ survey reporting they’re in crisis or survival mode.

“The biggest change this year will be how IT is financed, not necessarily how much IT is financed.”

Gartner’s forecasts see New Zealand spend growing 2.4 percent in the coming year, to hit NZ$12.5 billion, with Australia clocking a more robust 4.0 percent growth to reach almost AU$98 billion in 2021. To be fair, those figures come after a decline of 2.0 percent in New Zealand last year and 1.0 percent in Australia. In fact, while spending might be heading up, Gartner says while 2021 is a year of recovery, it won’t be until 2022 that it’s ‘recovered’.

For both countries enterprise software is expected to have the highest rebound at 7.7 percent and 7.8 percent, respectively, as remote work support is expanded and improved.

That enterprise software growth accelerates in 2022, with a forecast of 12.2 percent growth for New Zealand, to hit $2.9 billion, and 10.1 percent growth in Australia taking spend to $21.5 billion for the year.

Gartner says businesses will be forced to accelerate digital transformation plans by at least five years to survive in a post-Covid-19 world that involves permanently higher rates of remote work and digital customer interactions. Globally, IT spend related to remote work will is forecast to jump 4.9 percent this year to US$332.9 billion.

But John-David Lovelock, distinguished research vice president at Gartner, says the biggest change this year will be how IT is financed, not necessarily how much IT is financed.

“Greater levels of digitalisation of internal processes, supply chain, customer and partner interactions, and service delivery is coming in 2021, enabling IT to transition from supporting the business to being the business.”

He says digital business represents the dominant technology trend in late 2020 and early 2021, with areas such as cloud computing, core business applications, security and customer experience at the forefront.

“Optimisation initiatives, such as hyperautomation, will continue and the focus of these projects will remain on returning cash and eliminating work from processes, not just tasks.”

While all segments broken out by Gartner – data centre systems, enterprise software, devices, IT services and communications services – are forecast to return to growth in Australia devices will remain in decline in New Zealand, down 1.4 percent.

While Gartner’s quarterly spend takes in the top end of town, figures from an IDC small and medium business survey suggest a similar, though perhaps more subdued, story, with 51 percent of Australian SMBs expecting to increase their IT spend this year. New Zealand SMBs are less keen, with just 43 percent expecting to increase their spend.

Chris Morris, IDC Asia Pacific partner and vice president of cloud services, says the lockdowns and WFH directives not only delayed projects or initiatives, but also exposed SMBs shortcomings in connectivity, support, security and sourcing.

“Business resiliency of these SMBs was put to the test as their IT systems adapted to a new operating environment.

While cost optimisation remains a top priority in 2021, IDC says it expects SMBs to continue investing in technology to modernise their existing systems and to build innovative new business models.

Those new business models may include the ‘side hustles’ so talked about for individuals, with SAP Concur A/NZ flagging side hustles and the introduction of new government and private-sector incentives as key trends for the year ahead.

Fabian Calle, SAP Concur Australia and New Zealand managing director for small to medium businesses, says small businesses are preparing for what they will do in a world beyond Covid-19 support packages, such as Australia’s JobKeeper which finishes in the first half of 2021.

“They are now looking to recently announced public and private-sector incentives, such as small business banking packages or open tender exemptions for Australian federal government contracts as new avenues to maintain business momentum,” Calle says.

“Seeking and capitalising on new opportunities to maintain business agility is also leading to a rise in microservices and side hustles to meet emerging product and service demands.”

An Aberdeen report found up to 70 percent of Australian companies with fewer than 1000 employees were ‘now prepared to invest in technology solutions to speed up the recovery process’.

Calle says he expects to see even more SMBs embracing digital commerce to achieve new capabilities such as online sales.

“Others are using digital solutions to add side hustles and encourage new income streams; for example, more restaurants are also offering takeaway and home delivery services as a permanent extension to their business, while some corner stores are adding parcel delivery services.

“This creates more options for people to shop locally and helps SMBs to fill gaps in supply chains.”

As to the top tech spending categories for SMBs, IDC says cloud, collaboration and cybersecurity solutions are expected to see the biggest increases in spend in the coming year.

IT services too, is likely to be a big player.

“Covid-19 has challenged SMBs digital transformation journey beyond their capabilities,” Morris says. “With digitalisation being the focus for A/NZ SMBs in the next 24 months, these businesses will require tech and business professional service as much as technology itself,” he says.

That’s a view shared by New Zealand’s Ministry of Business, Innovation and Employment, which has just launched a $15 million Digital Boost training and support initiative to help Kiwi SMBs learn more about the technologies relevant for their business and how to apply them.

You can read about the Digital Boost programme here.

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