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The chances of a recession are still debated, and inflation appears to be stubbornly high for at least the rest of this year, but when it comes to corporate tech spending, it’s running in full force.
A new CNBC Technology Executive Board survey shows that more than three-quarters of technology leaders expect their organizations to spend more on technology this year. No one said they would spend less.
Technology leaders say if they have learned anything from past recessions, it is that technology is not a cost center but a business driver.
The areas in which they focus their investments include cloud computing, machine learning, artificial intelligence, and automation.
“In other cycles we’ve seen in the past, technology investment has been one of the first casualties,” said Nicola Moreni-Bianzino, chief technology officer at professional services giant EY. “But after the pandemic, people realized that in an environment of a downturn, or even a possible depression, we still need to maintain our technology investments.”
“If you look at what has happened over the past two years, it is clear that technology is the sustainable differentiator that sets companies apart,” said Danny Allan, chief technology officer of data protection firm Veeam.
That was certainly the message from veteran investor, LinkedIn co-founder and Greylock partner Reid Hoffman, who was a guest speaker on the city council’s CNBC Technology Executive.
“In this environment, we are competing to deliver the highest and the longest value to our business,” he said. “So ask yourselves: Where do I have a competitive advantage and where can I play offensively?”
Driving positive business agendas
For many companies, the technology agenda and business agenda have become one and the same, said Guido Sacchi, chief information officer at Global Payments. In his talks with leaders of business units at Global Payments, he said that no executive has suggested that cutting spending on technology is the right way to respond to a potentially severe economic downturn.
“Everyone understands what technology brings to the table,” he said. “None of them wanted to cut anything,” he said.
Global Payments focuses specifically on products, cloud platforms, analytics, artificial intelligence and machine learning, areas it describes as essential to “drive positive business results.”
Working with clients, Sacchi says it’s clear that technology is firmly woven into the fabric of everything its clients do to keep moving forward. The company works with many of the best quick-service restaurants that have leveraged artificial intelligence and other advanced technologies to facilitate faster deliveries and recognition patterns from cars to customers.
The same is true for healthcare clients who took advantage of telemedicine during the pandemic when patients were unable to see their doctors in person. “The pandemic has sped up the deployment of a lot of these new technologies, and now companies don’t want to go back,” Sacchi said.
The latest annual survey of JPMorgan’s chief information officer confirms this. It collected spending plans by 142 CIOs responsible for more than $100 billion in annual enterprise budgets and found that IT budgets are growing — even if they’re not keeping pace with inflation. For this calendar year, surveyed CEOs see IT budget growth of 5.3% and 5.7% in 2023. This is a significant shift since the survey was conducted during the pandemic and IT budgets shrank by about 5%.
Allan said that despite the uncertain economic climate, companies that are positive for good financing and cash flow are particularly well positioned to create more distance between themselves and competitors. “This is what separates the good from the great leaders, those who can recognize this time and benefit from it,” he added.
His company’s technology spending focuses on protecting modern data. “What could be more important in an economy that is so dependent on technology and data than is making sure you can protect that data,” he said, adding that as companies continue to transition from traditional infrastructure to cloud infrastructure, they need to make sure their data isn’t vulnerable. To attack cyber attacks and malware.
And when it comes to AI, Hoffman advises companies to keep investing, while doing their homework. “Not everything is AI,” he said during a recent TEC Town Hall event. “Take the time to learn where to apply it, how to make it work for you, and why it is used.”
Even if AI investments aren’t part of today’s budget, Hoffman says smart play is to stay on the learning curve with technology and rethink it in the future.
“You sacrifice the future if you choose to withdraw completely from AI,” he said.