The Surprising Impact of the Pandemic on IT Spending and Strategy

The Chinese word for “crisis&rdqo; is commonly, but incorrectly, said to be the combination of the Chinese characters for “danger” and “opportunity.” Contrary to what John F. Kennedy said and what is now a frequent business meme, the second character has multiple meanings, and by itself means “inflection/change point.”

This more correct definition doesn’t obviate its applicability to business. It just means that crises will bring about unpredictable change — some positive, some negative. This new meaning is the perfect way to describe what began to happen to IT during the pandemic.

The U.S. economy may have shrunk by 3.5% in 2020, but it turns out that IT spending and strategic decisions changed in unforeseen ways. During this shrinkage, increased investment in technology was seen as a way out of the malaise. According to an Enterprise Strategy Group (ESG) survey, by June 2020 more than 60% of IT decision-makers believed that the COVID-19 situation would make their organizations more dependent on information technology.

The session Data-Driven Strategies for Growth and Innovation Amidst a Pandemic at the Hitachi Social Innovation Forum 2021 shed light on how forward-thinking companies rethought virtually every aspect of their IT budget. It turns out that many companies doubled down on technology and accelerated a variety of initiatives. They began reimagining how their employees work, where they engaged with customers and partners, and what they planned to do to become better prepared for unforeseeable events.

In the early days of the pandemic, ESG asked IT decision-makers to describe their expectations for the year ahead. According to senior strategist Scott Sinclair of ESG, a significant number believed: “We’re going to scale back, we’re going to cut costs, we are going to kind of batten down the hatches and survive the storm.”

But as early as June 2020, when 500 senior IT decision-makers in North America were asked how they believed the COVID-19 pandemic would impact their organization's overall reliance on information technology, a surprising narrative began to emerge. Contrary to findings from June's survey, the “sky is falling” sentiment had ended, and the confidence in investing in technology had returned.

Looking Inside 2021 IT Budgets

When ESG revisited IT executives in 2021 and asked what had happened, analysts discovered that 60% of organizations had revised their budget, with two-thirds reporting that they were spending more than their original budget. Naturally, IT recommended investments that would protect operational programs — a proactive framework that seemed to ultimately drive purchasing decisions.

One of the highest priorities was investing in retooling day-to-day work patterns. With workflows distributed, employees required better tools to ensure productivity, and online collaboration tools were a significant driving force in addressing the need.

In addition, ESG reported a strong strategic shift in the accelerated adoption of public cloud services and use of public cloud infrastructure. With that, data centers and private clouds began responding by revisiting application infrastructure and architecture strategies. ESG analysts noted an increased transition to cloud-native, container-based infrastructures like Kubernetes.

Managing IT Complexity

Analysts suggest these moves reveal a lot about where IT modernization is headed. They note that pandemic-imposed IT changes brought a significant increase in IT complexity. Sinclair reports that according to 75% of IT organizations, ”IT is more complex than it was just two years ago.” He cited an 11% increase in comparison to answers in the initial survey taken less than a year earlier.

Notably, 49% percent of respondents shared that the pandemic revealed a need for more digitization within their business, creating real demand for modernization. Beyond digitalization, other requirements, such as remote working, adhering to new security regulations, and a spike in data volumes and exchanges, were catalysts to change.

The response led to decisive action for modernized data centers. ESG reports widespread investments in on-premises, hyperscale, private cloud-like solutions, and hybrid-cloud solutions. Over a third of respondents shared plans to seek out ways to adopt hyper-cloud infrastructure and increase use of software-defined architectures.

That’s a broad expanse of technology, to be sure. There is no agreed-upon silver bullet, and many IT organizations will turn to multiple options to address their needs. But according to Sinclair, ”What we definitely saw as a response to COVID-19 was an increased demand to modernize every aspect of IT, both off premises and on.” With modernization comes awareness around the implications of near-term flexibility as well long-term sustainability.

Tomorrow’s Hyperconvergence Is Here Today

It seems apparent that a hyperconverged infrastructure, once seen as the next cutting-edge paradigm, is headed for mainstream adoption. It’s all in the name of scaling while mitigating challenges and maximizing a medium for future growth.

Sinclair believes that the pattern has legs. Beyond the 60% of IT decision-makers who shared their plans to increase IT spending in ESG’s 2021 survey, 35% advised that they would maintain spending levels “… because we need to implement a long-term technology strategy that makes us more flexible and more resilient as an IT organization across our infrastructure, to handle all these future, major business disruptions.”

Even though the common “crisis” meme isn’t correct, there is opportunity in the change ahead and the trials of the pandemic have shown the way. It is impressive to see how quickly IT decision-makers summoned the courage to look ahead and seize the chance COVID-19 presented to build for their organizations’ futures.