If a recession hits, this is where CIOs plan to cut spending


A recession won’t hit all areas of IT investment equally: A Morgan Stanley survey suggests key categories for CIOs.

Creative crash recession chart with falling red arrow.
Image: Who is Danny/Adobe Stock

For those of us that have been through a recession (or two), the wasteland that is our 401(k)s is unpleasant but not unprecedented. The word recession conjures up images of bread lines and bankruptcies, and certainly recessions tend to hit vulnerable people the hardest. But even as tech companies see their stock valuations implode, enterprise IT will still spend, just as it did through the dot-com bust and 2008.

But not across all categories.

“The boom times of the last decade [may be] unambiguously over,” as Lightspeed Venture Partners warned startups, but some technology areas are much less likely to get cut, like security, while others, like data center automation, are prone to getting pruned.

Separating out the essential

Tech investor Eric Jhonsa posted two charts from a Morgan Stanley Research CIO survey. In the first, CIOs were asked which IT projects they’d be most likely to cut should the economy worsen in 2022. In the second, CIOs were asked to identify where they expect the highest percentage growth in spending.

With regard to potential cuts, Morgan Stanley ranked projects from least likely to most likely to get cut, after netting out the score (i.e. 19% of CIOs said security was least likely to get cut, while another 4% said it was most likely, resulting in a net score of 15%).

With this in mind, here are the top 5 IT projects least likely to get cut should the economy worsen:

  1. Security software
  2. Digital transformation
  3. AI / ML / Process automation
  4. Outsourcing
  5. Data warehouse / Business intelligence / Analytics

SEE: AWS Lambda, a serverless computing framework: A cheat sheet (free PDF) (TechRepublic)

And here are the most likely to get cut:

  1. Collaboration software
  2. Data center build out
  3. Consulting
  4. Infrastructure hardware
  5. ERP applications

While digital transformation is a bit ambiguous as a category, security is not. Though security has traditionally been something deemed important after the fact — such as after a major breach puts a company in the news — the steady drumbeat of breaches has caused CIOs to get more proactive with funding improved security. No CIO wants to wake up in the news because they went cheap on security.

For different reasons, we should see continued investment in technologies and projects that help enterprises thrive despite a looming downturn. Companies were already engaged in a sprint to digitally transform themselves and make better use of data, but the potential recession is only accelerating this, much like the pandemic did before.

Contrarily, anything that sounds like old-school data centers with heavy CapEx will increasingly sound like a bad idea when times are tight. Uncertain times call for the flexibility of the cloud.

Spending goes up even in a down market

This is why cloud computing outpaced even security when CIOs were asked which IT projects will get the highest percentage of spending growth. The top 5 projects for growth are:

  1. Cloud computing
  2. Security software
  3. Digital transformation
  4. AI / ML
  5. Data warehouse / Business intelligence / Analytics

And at the bottom?

  1. Maintenance: Hardware
  2. Maintenance: Software
  3. Quantum computing
  4. Printers
  5. Mobile hardware

SEE: Cheat sheet: How to become a database administrator (free PDF) (TechRepublic)

Again, these areas of investment shouldn’t be a surprise: Though budgets may decline or flatten out, CIOs are tasked with doing more than merely keeping the lights on. For years CIOs have been asked to think strategically about IT and invest accordingly. CIOs can’t afford to turn off initiatives to operate smarter through software.

Not that the CIO is the only voice that matters here. How enterprises will invest in these key areas will be heavily influenced by developers. Stack Overflow recently completed its 2022 survey of over 70,000 developers, and CIOs shouldn’t be shocked to discover, for example, that Hugging Face will show up on their AI/ML budget because developers love to work with it. In other words, CIOs can help us to understand enterprise spending priorities, while developers can help to guide us to which companies or open source projects will see that investment.

Disclosure: I work for MongoDB but the views expressed herein are mine.





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