The year ahead is likely to be characterised by recessionary pressures in key global economies, increasing borrowing costs, unpredictable supply chains, oil price uncertainty, and volatile demand. 

Regardless of the challenges of the past few years and the hurdles ahead, digital transformation investments in the Middle East, Türkiye, and Africa (META) are set to more than double across the 2021–2026 period, according to the latest forecast from IDC. 

The global technology research, consulting, and events firm says that digital transformation spending in the region will accelerate at a compound annual growth rate of 16% over the five-year period, topping 74 billion USD in 2026 and accounting for 43.2% of all ICT investments made that year.

At the recent IDC Directions event in Dubai, Steven Frantzen, Senior Vice President and Regional Managing Director EMEA at IDC stressed how crucial it is for tech leaders to keep focused on the future and be customer-centric.  “It’s important for every tech leader to think about the near, mid and long-term when it comes to technology. You need to work with your customer by continuing investment in digital transformation, but how do we help our customers?”

“We heard about the global recession, in the Middle East we continue to see economic growth in every sector, but if you are a large market in the USA or Europe, it will also affect your business here.”

Frantzen said many are expecting a recession in the coming year. “According to a survey made by IDC, 75% say yes, so we need to manage the recession for the long term because companies are not cutting spending in technologies, spending on digital technology by organizations will grow at eight times the economy in 2023, establishing a foundation for operational excellence, competitive differentiation and long term growth.”

At the Directions event, it was made clear that the digital and tech investments made by companies during the pandemic to build resilience could be put to test in 2023. This may be seen across key business areas such as customer experience, operations, and financial management, among others. 

According to Jyoti Lalchandani, IDC’s Group Vice President and Regional Managing Director for the META region: “The implementation of further digitalization in critical areas and a more rapid shift to a ‘digital business’ approach will be key to separating the thrivers from the survivors.”

The region is expecting to see digital transformation spending as a share of overall IT spend continue to grow, reaching 43.2% in 2026, up from just 29.4% in 2021.

Digital Transformation

Steve Zerby prides himself on the fact that he not only mentors midlevel IT managers but spends time with all 211 people in the Owens Corning IT organization.

Steve Zerby, CIO, Owens Corning

Owens Corning

“I could probably tell you the name of their significant other,’’ says Zerby, who will retire as CIO of the company, which makes insulation, roofing, and fiberglass composite materials, in March 2023. “A good day for me is when I spend 51% of my time in either talent discussions or interactions with members of our team, from the lowest level to the executive level. That’s just the way we operate.”

While Zerby has groomed Owens Corning’s Vice President of IT Annie Baymiller as his successor, he has also forged ties with external CIOs so she can gain insight into what the top IT position looks like in other companies. In addition to Zerby, Baymiller has been mentored by Bill Braun, CIO of Chevron, and Mindy Simon, the former CIO of Conagra Brands.

“They’ve been key mentors for [Baymiller] for several years,’’ Zerby says. “I did that because I think highly of both, and it gives Annie good perspective on what other IT organizations look like — good, bad, or indifferent.”

Like Owens Corning, organizations are frequently turning inward to grow their own future CIOs beyond formal training programs, through a combination of mentoring, shadowing, coaching, and assigning additional responsibilities.

“There’s a real concerted effort to develop and train that middle [IT] organization and really strengthen it,’’ says Dan Roberts, CEO and president of Ouellette & Associates Consulting, which trains IT leaders. “Oftentimes, we call it the ‘frozen middle,’ because the mid-tier is what really sustains our change initiatives, and if they’re not strong and pushing, they’re not going to survive.”

“Every good CIO is building those succession plans and education programs to get their team ready,’’ agrees Len Peters, faculty director for the online CIO senior executive program at New York University and chairperson of The CIO Institute.

But there is also a misnomer about what the CIO role is, and that can affect how people are trained, he adds. People “think it’s the tech person or the person who runs IT,’’ Peters says. “The CIO is a business leader who happens to know a lot about technology.”

The case for developing a deep leadership bench

To ensure the long-term health of the company, tech chiefs must focus on building up that middle tier of IT leaders, a reality many CIOs are only now recognizing the need to address.

“There are not enough people out there — you have to develop your own people,’’ says Roberts, who estimates that only 10% to 20% of companies are “being intentional about doing formal development programs.’’

Mike Eichenwald, a senior client partner at Korn Ferry Consulting, agrees that it’s important to elevate individuals from vertical leadership roles within the pillars of infrastructure, engineering, product, and security to enterprise leadership roles. With technology converging in all aspects of the business, doing so will help organizations leverage the diversity of experience those midlevel managers have under their belts, and their learning curve and degree of risk will be minimized, Eichenwald says.

“Unfortunately, organizations miss an opportunity to cultivate that talent internally and often find themselves needing to reach out to the [external] market to bring it in,’’ he adds.

But developing future IT leaders requires more than it has in the past, given the speed and complexity of change in today’s uncertain and volatile business landscape, Roberts says. Internal training programs “are not getting the job done for IT leaders,’’ he claims, because they tend to be more generic, “and let’s face it, IT has a unique set of challenges and responsibilities.”

While anyone can initiate change, Roberts says, leading and sustaining it is harder to accomplish. “If they don’t have that change muscle, initiatives are more complicated.”

Here is a look at how CIOs are growing midlevel IT leaders for the CIO role and IT leaders who are benefitting from their experience.

Increase responsibilities and find opportunities outside of IT

Tim April believes wholeheartedly in growing his internal people to become CIOs to increase stickiness and retention. April, executive vice president and CIO of Vail Resorts, says the CIO’s biggest job is talent selection and development.

Tim April, EVP and CIO, Vail Resorts

Vail Resorts

“My philosophy my whole career is that everybody’s job should be to work themselves out of a job,’’ he says. As CIO, April is “trying to develop an organization and team that doesn’t need me,’’ he says. “It’s actually the most healthy thing for the organization” to build an IT team that is sustainable, self-contained, and self-managed.

That way, you have a strong succession pipeline. “A strong succession plan means you don’t want to rely on one successor and you should always be investing in multiple people,’’ he says.

CIO preparation at Vail Resorts focuses on the vice presidents who have demonstrated competence at that level and have a stated ambition to become a CIO. April increases their responsibilities so they gain an understanding of how to run the whole IT department.

“Pushing them outside their comfort zones and expanding their scope forces them to think differently about the leadership role they play,’’ he explains.

For example, he has one vice president who ran all software applications for the mountain division, and over time, April has added the software portfolios of other lines of business to that vice president’s responsibilities.

This gives them more stakeholders to engage with and manage. It also forces them to change how they prioritize their time and where to focus their energies — one of the hardest things for everyone to do at every level, according to April. People get used to where they feel they can add value and where they are productive, so this trains them to do that at different levels of leadership, he says.

“When you continue to progress and you have exponential growth in your scope of responsibility, you don’t have the capacity to do the things you used to do when you had less scope, so it forces a behavioral change,’’ he says. It also changes the way IT leaders lead because they are not as involved in the day-to-day details as they assess risk and talent at a different level, April says.

“That helps start prepping them for the next step,’’ he says. “That’s a very consistent behavioral process that’s very much about preparing people [to become] the CIO.”

Of course, only one vice president can become the eventual CIO. So even though a few people are being groomed for the role, they have the opportunity to run an operation outside of IT to gain experience that could still be beneficial for a future CIO position. That’s the case for one of the Vail Resort’s vice presidents whose whole career has been in IT. She has taken an operational leadership role running all guest services at Vail Resorts but still reports to April.

“She may still want to be CIO but will do this for a few years and get an entirely different set of professional experiences overseeing thousands of employees out at the resorts,” April says. “I’m still coaching and mentoring her on potential opportunities to be CIO” while she gains exposure to what it is like to run a large operation.

“The key is you’re not limiting your contributions” based on your knowledge of technology, he adds.

Right now, April has three potential successors, two in IT and the vice president who is running guest services. “I’m not moving anywhere,’’ he notes, “but that should be my mindset every day — I want succession candidates, and my job is to get them ready.”

He speaks from experience. Before April became CIO, “I was No. 2 to our prior CIO for about 10 years,’’ having been identified as a potential successor. April also stepped outside of IT “and ran large programs and didn’t limit my scope. If you get bored, it’s your own fault,’’ he says. “There are plenty of ways to step up and play leadership roles and anything you do outside IT will make you a better CIO.”

April also recognizes that some of the vice presidents may find CIO opportunities outside of the company and says if he’s not ready to step down, they should “go for it” but with a caveat. “I do tell them their responsibility is to have a strong team underneath them and have clearly defined successors” so if they leave the company, there is a seamless transition.

“Part of your legacy is how well-prepared your team is,’’ he says, “and what level of succession planning you have in place to ensure someone could step into your role.”

Prepare to be uncomfortable

Having had a strong mentor early in his career, Michael Mahar, vice president of technology at Wyndham Hotels & Resorts, also knows the value of gaining experience beyond the tech realm, saying he was given autonomy and the opportunity “to experiment, learn, and fail fast.” That type of culture has resonated with Mahar throughout his career.

Michael Mahar, vice president of technology, Wyndham Hotels & Resorts

Wyndham Hotels & Resorts

“Creating a culture to learn and grow where failure is not critical and is looked at as a growth opportunity,’’ creates a mindset that makes you more growth-oriented, Mahar says. “I looked for new things to take on because I wasn’t afraid to fail and knew I had support from the leadership team if I did make a mistake.”

Now, Mahar, who has held at least 15 different positions at Wyndham, is paying it forward and carving out time to mentor IT managers at the hotel chain.

“I’ve described myself to people as a people leader who has a high acumen for technology,’’ he says. “The way we accomplish our goals for the business is to help people grow.”

People in general want to contribute and do well, Mahar says. “As a leader, the more that I can help them be successful, the more successful we can be as an organization. That has been proven time and again.”

Mahar does a combination of mentoring, shadowing, coaching, and providing formal training, tailored to individual needs.

For example, he has one direct report with whom he is “very direct” in providing feedback and has also given a lot of autonomy. Another direct report is very risk-averse and wants to talk things through. “With that individual, I take a much more hands-on approach where I mentor and listen and ask questions,” he says.

Mahar says he is “on a CIO track” and continues to look at opportunities to take on new things as well as doing some public speaking and networking.

Wyndham CIO Scott Strickland has mentored Mahar by helping him build relationships throughout the company and promoting a philosophy called “yes, if,” meaning “yes, we can do that if we have these resources,’’ Mahar says. “It’s changed the way we innovate and work with the business.”

As Mahar forges ahead, he says he has learned two valuable lessons: be willing to take on something new and be prepared to be uncomfortable — and encourage your team to be uncomfortable, too. “A lot of leaders steer away from that,’’ he says. “They want to provide all the answers instead of allowing their teams to grow and learn on their own and take on mentor roles.”

Learn to become a great people leader

As the incoming CIO of Owens Corning, Baymiller credits Zerby’s commitment to helping her and other IT leaders on the “journey of development.”

Annie Baymiller, vice president of IT, Owens Corning

Owens Corning

She calls Zerby “a special type of leader’” who takes great interest in making sure people have challenging work. “And he builds roles around people,’’ she says. “Something we’ve adopted in our IT organization is balancing the things you’re great at with things you need to be learning.”

Zerby’s decision to find external mentors to also work with her was transformative, Baymiller says. It helped her build trusting relationships to the point where it was easy to pick up the phone to bounce ideas off them.

Baymiller says Zerby also helped to put together a capability map on skills she and the other CIO contenders are expected to have expertise in. That led her to “go build my development plan and do a self-assessment” of where she had natural strengths and where she had to grow her skills.

A great CIO starts by being a great people leader, Baymiller says. Getting to lead diverse teams in Europe and in North America helped her tremendously. “It made me a better people leader,’’ she says.

Baymiller has also learned that to be a successful CIO requires the recognition that you need a leadership team with the right depth, “so I’m making the right decisions from a risk mitigation strategy.”

From Zerby, she has also learned to be open to feedback. Baymiller says she hopes to continue Zerby’s legacy of building a high-performance leadership team. “I mentor people across the company, and it’s super rewarding to learn about different functions and understand what people are trying to learn. I’m a huge believer in the value of teams.”

Her goal as CIO is for her people to “wake up every day feeling supported and … if I continue to grow that leadership team the way Steve has, we have a couple of fun years ahead of us,” she says.

Invest in people and give your time

Claus T. Jensen, chief innovation officer, Teladoc Health

Teladoc Health

For Zerby, one of the most important things a CIO can do is to invest in their people. “If you’re really invested in them and they win, you feel great, and when they have bad days, you feel rotten,’’ he says. These CIOs are constantly thinking about the development and advancement of their staff.

For CIOs who want to grow their own successors, “the most pertinent question is probably how much of yourself are you willing to give in the grooming of the next generation,’’ adds Claus T. Jensen, chief innovation officer of Teladoc Health, who mentors midlevel IT managers. “It’s not usually the first question people ask — and it’s the one they should ask. Giving of yourself is not just your time but being vulnerable to share the good and bad moments in your career as learning opportunities.”

It comes down to how you measure your own success as a CIO, he says. “If your metric for success doesn’t include a better team, you have to think twice about whether you’re going to be the one pushing people toward being the next C-level leader.”

IT Leadership, IT Training 

At Melissa & Doug, a toy company whose mantra is “more play time, less screen time,” CIO Mike Macrie isn’t planning to take his colleagues’ screens away — but he is looking for ways for technology to better enable their creativity and remove drudgery. “My belief is that technology is a set of tools to help them express themselves, to empower them,” he says.

No matter where you work, he adds, “You never want to be in a role where you’re fighting the technology to get your daily job done.”

After a couple of years of change, however, there are still elements of that, he admits, but the leadership team is focused on improving its commitment to get employees the most modern tools in their hands to make their daily jobs as easy as possible. “We are seeing a tremendous difference in employee engagement,” he says.

One step in that direction is the replacement of Melissa & Doug’s homegrown ERP system, custom-built in Delphi, with a more modern SaaS platform.

Macrie has only been with Melissa & Doug for eight months, but he’s taken the time to learn where the Connecticut-based company was coming from, as well as where it’s heading. “The history was a very design- and creative-driven organization,” he says. “It was always about the children, and there wasn’t a lot of focus on the back office or supply chain,” he says.

The company is growing fast through online sales (in the US only for now) and international retail distribution, and also has operations in the UK and China. But the Delphi system was showing its age and the decision was taken a couple of years ago to look for a replacement, he says.

“We had challenges making all the international paperwork and transactions work across borders as we grew in volume,” he says. Getting to more flexible pricing was also proving difficult, as was offering real-time visibility into inventory for e-commerce operations.

Dropping Delphi

Continuing to build on the existing code base was out. “Trying to find Delphi coders isn’t an easy task,” he says. It was time to modernize the core ERP system.

The company evaluated a number of mid-market solutions, including Oracle NetSuite, but it was another Oracle product that won in the end: Oracle Fusion Cloud Apps.

There were several reasons for the choice. “It offered better international support and it better matched the company’s ambitions,” he says. “We didn’t want to be in a position where, as soon as we were finished implementing NetSuite, we had to start working on Fusion.” That turned out to be the right call because within a couple of years, they would have outgrown what NetSuite could have provided. And back-to-back migrations would certainly have put a strain on resources since Macrie’s IT team is a lean 24 serving around 700 employees globally with around 50 external consultants working on the Oracle Fusion implementation.

So a year into a three-year program, they have completed most of the financial implementation and all of the procurement implementation, and currently implementing the order to cash and warehouse management and inventory items, which are really the core of their distribution business, he says.

The changes in finance specifically are already helping with his goal of reducing drudgery. “Take the financial close process,” he says. “It was very manual in nature, a lot of spreadsheets. Now using Oracle’s ERP has probably cut the number of steps down by 75% for the accounting department.”

Similar changes are afoot in order processing as well, where a lot of paperwork has been removed, and Macrie is looking forward to the day when warehouse staff will be equipped with handled scanners rather than walking around with sheafs of paper. “[These are] all improvements that we think are going to provide significantly more efficiency to us as well as more employee satisfaction,” he says.

Communicating change

As you’d expect with such a major transformation, Macrie and his team are, internally and with their partners, constantly communicating at the executive level to all employees about why they’re doing it, what they hope to accomplish, and how it’s going to support growth objectives. Plus, there’s specific training associated with the changes, especially for staff working in the warehouses, in English and Spanish in the US, and in Mandarin in China, he says, “We continually work with them to get their feedback on that training: How do we make it better and more efficient; how do we get people up to speed on the new systems and platforms faster.”

It’s not all IT pushing through changes, though. Sometimes they are being pulled.

“As people’s eyes open up to what’s possible, they quickly start pulling through: Here’s how you can get another 10% efficiency, this is how we get another 5%, and all those ideas start flowing in,” he says. “It’s been a really great surprise for us how engaged the workforce can be to help us continually improve, whereas in the past they might have felt really restricted by our systems and not as open with us on how we can all work together to improve the company.”

Although the decision to adopt Oracle Fusion applications was made before Macrie arrived at Melissa & Doug, his experience so far has changed his mind about the Oracle offering. “Five years ago I would’ve said the world’s not ready for the midmarket to move into Fusion apps,” he says. “But if you can make it work in your organization and you’re bold enough to take the risk, it’s worth taking now since so much of the technical risk has been removed with cloud and SaaS.”

Even so, the company isn’t going all-in on Fusion apps; it’s adopting Manhattan WMS rather than Oracle Warehouse Management Cloud, and recently moved its e-commerce operations to Shopify Plus — a prescient move given the turmoil surrounding Oracle Commerce Cloud. And following a wave of layoffs in the Commerce Cloud team, some analysts figured Oracle had chosen to sunset the product, but Oracle later claimed it was shifting responsibility to better integrate it with other Fusion apps. If that’s so, then it may yet win Macrie over. “We will continue to be evaluating them over our needs as we move forward,” he says.

CIO, Cloud Management, ERP Systems, IT Leadership, Oracle, SaaS

Even as enterprises attempt to tackle economic headwinds with budget cutbacks, a research report from market research firm Gartner showed that end-user public cloud spending is expected to grow in 2023.

The report, which covers categories such as infrastructure-as-a-service (IaaS), platform-as-a-service (PaaS) and software-as-a-service (SaaS) among other cloud services, showed that public cloud spending is slated to reach a total of $591.80 billion in 2023, a 20.7% increase from $490.30 billion in 2022.

The 20.7% growth in spending is higher than the 18.8% growth recorded in 2022.  

“Current inflationary pressures and macroeconomic conditions are having a push and pull effect on cloud spending. Cloud computing will continue to be a bastion of safety and innovation, supporting growth during uncertain times due to its agile, elastic and scalable nature,” said Sid Nag, a vice president and analyst at Gartner.

Infrastructure-as-a-service to outpace other services in growth

Out of all the public cloud services, IaaS is expected to see the highest growth in 2023 with spending expected to reach $150.25 billion, an increase of 29.8% from $115.74 billion in 2022.

The reason for the growth, according to Gartner, is continued migration of enterprises to the cloud.

“IaaS will naturally continue to grow as businesses accelerate IT modernization initiatives to minimize risk and optimize costs,” Nag said, adding that moving operations to the cloud also reduces capital expenditures by extending cash outlays over a subscription term.

This benefit will play a vital role during times of economic uncertainty as cash will be critical to maintaining operations for an enterprise, the analyst said.

PaaS and SaaS to grow despite challenges

SaaS is expected to grow but might see the most impact from an economic downturn due to staffing challenges and enterprises’ focus on margin protection because of inflation, according to Gartner.

“Higher-wage and more skilled staff are required to develop modern SaaS applications, so organizations will be challenged as hiring is reduced to control costs,” said Nag.

SaaS spending is expected to reach $195.20 billion in 2023, an increase of 16.8% from $167.10 billion in 2022. SaaS spending in 2021 was estimated at $146.32 billion.

Explaining the continued growth in SaaS services, Nag said that cloud spending will grow due to its “perpetual” usage.

“Once applications and workloads move to the cloud they generally stay there, and subscription models ensure that spending will continue through the term of the contract and most likely well beyond,” Nag said.

PaaS spending is expected to grow by 23.2% to reach $136.40 billion in 2023 compared to $110.67 billion in 2022.

The growth in PaaS services can be attributed to its ability to facilitate more efficient and automated code generation for SaaS applications, according to the market research firm.

However, despite the generally upbeat outlook, Gartner cautioned that if enterprises end up deciding to make large budget cuts, cloud spending could be affected since it forms the biggest chunk of any IT budget.

“Cloud spending could decrease if overall IT budgets shrink, given that cloud continues to be the largest chunk of IT spend and proportionate budget growth,” said Nag.

Other public cloud services such as security capabilities, business process services (BPaaS), and desktop-as-a-service (DaaS) are all expected to grow in 2023, the report showed.

Budgeting, Cloud Computing

Global spending on software will continue to grow despite headwinds in the form of inflation, geopolitical risks and labor shortages, a new report from Forrester shows.

Driven to a large degree by deployment of cloud and enterprise applications, software spending worldwide is expected to grow at a compound annual growth rate (CAGR) of 10.3% from 2021 to 2023—more than two times faster than the rate of spending in other segments of IT, which is forecast to be 4.4%, according to the market research firm.

The report, which is based on a survey of 657 publicly traded software companies, forecasts that dramatic macroeconomic conditions and other factors will have little to modest impact due to the “underlying strength” of the software industry fundamentals.

More than half of the companies surveyed are expected to grow revenue at a medium pace, or between 10% and 20%, the report says, adding that leading software vendors will see another year of solid revenue and profit, albeit at a slower pace than 2021.

The report also shows that software has been the fastest growing category within enterprise IT budgets,  and has delivered high revenue growth rates consistently for vendors.

Cloud to drive enterprise software growth

Enterprise software—including application and infrastructure software—is expected to grow by 12% growth in 2022, buoyed by investment in cloud technology as a result of accelerated digital transformation efforts due to the pandemic, the report says.

“Investment in cloud to modernize legacy applications will drive strong software sales momentum in front- and back-office applications,” the report reads.

The application software market will see a 11.4% CAGR in 2022 and 2023, exceeding $400 billion, Forrester says. Front-office apps—such as CRM software and industry vertical programs—will grow the fastest in this segment, according to the report, which forecasts the $64 billion CRM market to grow by 11.9% in 2022.

ERP application sales are expected to increase at a rate of 10.4% in 2022, also driven by digital transformation efforts. Sales of content and collaboration software, such as Microsoft Teams, Zoom and Slack, are expected to grow at a rate of 11.9%, according to the report.

Sales of custom-built software for various internal divisions across enterprises, which Forrester defines as vertical software, are also expected to grow.

Infrastructure software sales to increase by 12.6%

Infrastructure software sales, meanwhile, are expected to grow at a rate of 12.6% in 2022 and 2023 to exceed $400 billion, driven by the evolution of legacy database technology and investments in devops and database management software, according to Forrester.

Within the infrastructure software category, database management software is expected to grow at 12.8%, driven by demand for real-time analytics.

Further, tech management software, another subcategory within infrastructure software, is expected to maintain growth momentum of 13.1%, driven by the trend for businesses to modernize their tech stacks with complex serverless architectures and containers.

However, security software—also considered by Forrester to be infrastructure software—is expected to grow fastest, at a CAGR of 15.4%, due to multiple attack incidents and geopolitical challenges such as the Russia-Ukraine war.

Software has room for continued growth

Aggregate market capitalization of publicly traded software companies increased from $718 billion in April 2010 to $5.4 trillion currently—equating to a CAGR of 18%, according to the report. The survey also shows that the software sector accounts for only 5.9% of total  global market cap of public companies, indicating more room for growth.

Another reason for continued growth can be attributed to software vendors’ ability to raise prices consistently without losing demand, as software forms a critical part of day-to-day operations, the report says, adding that this strategy results in high and stable margins for vendors.

Companies that have raised prices recently include the likes of Adobe and Microsoft.  

Profit margins, which could be as high as 70% on average, allow software vendors to strategize while weathering challenges such as uncertain macroeconomic conditions, the report says.

Enterprise Applications, Technology Industry

Plummeting sales of printers and PCs and a growing inflation crisis aside, IT spending will remain strong through 2022, rising 3% year-over-year to a total of $4.5 trillion, according to projections released by Gartner Research.

The 3% increase in total IT spending represents slower growth than in 2021, as the economy as a whole and the IT sector in particular began to recover from the effects of the pandemic, and growth will largely be driven by cloud services and the data center, Gartner said.

According to John-David Lovelock, research vice president at Gartner, inflationary pressures are top-of-mind for most IT decision-makers at the moment, which creates a degree of uncertainty—high prices today could become even higher tomorrow.

“Organizations that do not invest in the short term will likely fall behind in the medium term and risk not being around in the long term,” warned Lovelock in a statement. “The current levels of volatility seen in both inflation and currency exchange rates is not expected to deter CIOs’ investment plans for 2022.”

Inflation is making itself felt in another way, as well, in combination with economic uncertainty driven by the Russian invasion of Ukraine—enterprises are moving heavily away from an ownership model of IT to a service-based one, with cloud spending expected to rise by 22.1% in 2022, according to Gartner.

It’s not all doom-and-gloom for the hardware sector, either, however, as this increased demand for cloud services will push hyperscalers like Amazon, Microsoft and Google to build out capacity. An annual growth rate of 16.6% for server spending will go some way to offset the projected 5% drop in PC, tablet and printer sales, Gartner’s predictions indicated.

Managed services on the rise

The IT talent crunch, as well, has complicated IT spending analysis, Gartner noted. Service providers have been forced to increase prices in order to offer more competitive compensation, which is another factor pushing CIOs toward managed services and the cloud, as hiring in-house IT staff becomes more and more expensive.

These market trends could put small and medium-size businesses, in particular, in a difficult position, according to Gartner senior principal analyst Linglan Wang. Higher prices, combined with a sharper motivation to invest in IT sooner rather than later, is likely to be much less of a financial headache for large enterprises than it is for SMBs.

“Polarization is certainly seen across all IT markets, with a ‘big becoming bigger, winner takes all’ situation,” she said. “We forecast this trend is going to continue over the next couple of years.”

Cloud Computing, Data Center, Technology Industry