Enterprise Execs Expect IT, Communications Spending to Drop because of Covid-19

Enterprise budgets almost always bear a direct relationship to revenue expectations, so it comes as no surprise that 61 percent of respondents to a new survey say their information technology budgets are affected by the Covid-19 pandemic, according to a survey undertaken by Dresner Advisory Services. 

It is not hard to guess that the primary change is smaller budgets, as spending virtually always is reduced in a recession, especially when a steep decline in revenue is anticipated. And that is the inevitable result when most parts of an economy are deliberately shut down. 

source: Computer Economics

The information technology industry alone might see a revenue dip of possibly 1.4 percent or so if the annual growth rate falls to about two percent over 2019 levels. Prior to the pandemic, Forrester Research had expected annual information technology spending to be in the 3.4 percent range.

But that is based on a recovery in the second half of 2020. If a recession happens, Forrester says there is a 50 percent chance that IT spending will decline by perhaps two percent for the full year. 

In either a second-half 2020 recovery or recession, Forrester predicts computer and communications equipment spending will be weakest, with potential declines of five percent to 10 percent. 

Technology consulting and systems integration services spending will be flat in a temporary slowdown and could drop by up to five percent  if firms cut back on new projects.

Software spending growth will slow to between two percent and four percent, best case; zero growth if a recession lingers. 

About 89 percent of respondents say operations are affected, while 75 percent say marketing is affected, according to the Dresner survey. 

source: Dresner Advisory Services

About 93 percent of respondents in education say the pandemic has had impact, largely because all classes essentially now are taught online only. Some 88 percent of consulting firms report project cancellations or delays. Fully 83 percent of respondents in the advertising industry report impact, most likely because advertising is early to be cut back in any recession. 

Healthcare is affected at least in part because of increased strain on facilities and staff. But more than 53 percent of respondents in every industry segment reported impact. 

source: Dresner Advisory Services