The chances for a recession are still being debated and inflation looks to be stubbornly high for at least the rest of this year, but when it comes to technology spending for companies it’s full steam ahead.
A new CNBC Technology Executive Council survey shows that more than three-quarters of tech leaders expect their organization to spend more on technology this year. No one said they’ll be spending less.
Tech leaders say if they’ve learned anything from past downturns it’s that technology is not a cost center but rather a business driver.
The areas where they’re focusing investments include cloud computing, machine learning and artificial intelligence, and automation.
“In other cycles we’ve seen in the past, tech investment was one of the first casualties,” said Nicola Morini Bianzino, chief technology officer at professional services giant EY. “But after the pandemic, people realized that in a down, or even potentially recessionary, environment, we still need to keep our technology investments.”
Danny Allan, chief technology officer at data protection firm Veeam, said that, “If you look at what occurred over the past two years, it’s clear that technology is the sustainable differentiator that sets companies apart.”
That was certainly the message delivered by veteran investor, LinkedIn co-founder and Greylock partner Reid Hoffman, who was a guest speaker at a recent CNBC Technology Executive Council Town Hall.
“In this environment, we’re competing for making the most and longest term value for our businesses,” he said. “So ask yourselves: where do I have a competitive advantage and where can I play offense?”
Driving positive business agendas
Guido Sacchi, chief information officer for Global Payments, said for many companies the tech agenda and the business agenda have become one and the same. In his conversations with business unit leaders at Global Payments, he says not one executive has suggested that cutting tech spending is the right way to respond to a potentially sharp economic downturn.
“Everyone understands what tech brings to the table,” he said. “Not one of them wants to cut anything,” he said.
Global Payments is particularly focused on cloud native products and platforms, analytics, AI and machine learning, areas he describes as essential to “driving positive business outcomes.”
In working with clients, Sacchi says it’s clear that technology is firmly woven into the fabric of everything its customers do to keep moving ahead. The company works with many top quick-service restaurants that have doubled down on AI and other advanced technologies to facilitate quicker deliveries and drive-thru recognition patterns for their customers.
The same holds true for its health-care customers that leveraged telemedicine during the pandemic when patients were unable to see their doctors in person. “The pandemic accelerated the deployment of so many of these new technologies and now businesses aren’t willing to go backwards,” Sacchi said.
J.P. Morgan’s recent annual chief information officer survey bears this out. It gathered the spending plans of 142 CIOs responsible for over $100 billion in annual enterprise budgets and found that IT budgets are growing — even if they’re not keeping up with inflation. For this calendar year, the CIOs surveyed see IT budget growth of 5.3% and 5.7% in 2023. That’s a big swing from when the survey was done during the pandemic and IT budgets contracted by nearly 5%.
Despite the uncertain economic climate, well-funded, cash-flow positive firms are in a particularly good position to create even more distance between themselves and competitors, Allan said. “This is what separates the good from the great leaders, the ones who can recognize this time and capitalize on it,” he added.
His firm’s tech spending is focused on modern data protection. “What could be more important in an economy that is so dependent on technology and data than making sure you can protect that data,” he said, adding that as companies continue to make the jump from traditional infrastructure to cloud infrastructure they need to make sure their data isn’t vulnerable to an onslaught of cyber and malware attacks.
And when it comes to AI, Hoffman advises companies to stay invested, but to do their homework. “Not everything is AI,” he said during the recent TEC Town Hall event. “Take the time to know where to apply it, how to make it work for you, and why it’s being used.”
And even if AI investments can’t be part of today’s budget, Hoffman says the smart play is to stay on a learning curve with the technology and revisit it down the road.
“You are sacrificing the future if you opt out of AI completely,” he said.
