Last week, the company reported first quarter results that were below its expectations, which President and CEO Christine Leahy says reflect the economic uncertainty that led customers to spend more cautiously and prioritize mission-critical initiatives.

“This demand contraction resulted in first-quarter performance below our expectations,” Leahy said in prepared remarks released along with the company’s preliminary first quarter results. “Volume declines were most acute with our largest commercial customers and across transactional products. Solutions were more resilient, but performance also came in below our expectations. While these results were disappointing, the team executed well in a rapidly changing environment.”

In the same statement, Chief Financial Officer Albert Miralles said the company will take efforts to align its “fixed cost base” with the level of anticipated demand. Full year 2023 earnings are now expected to be modestly below that of 2022, Miralles said.

Gartner’s IT forecast vs. CDW Q1 Results

IT analyst firm Gartner has a much more positive view, forecasting global IT spend to rise 5.5% from 2022 due to large increases in software and services. CDW’s preliminary earnings statement did mention strong results in “high-value solutions and services,” but a shift in more cautious buying was significant.

However, Gartner is also predicting a decline of 4.6% in devices, which is a key part of CDW’s business. In fact, the company says in its 2022 earnings report that hardware sales made up about 76% of its total net sales in 2022.

The company’s “disappointing” first quarter comes after 2022, in which CDW reported record net sales of $24 billion, which were 14% higher than 2021 sales, according to an annual report on file with the U.S. Securities and Exchange Commission (SEC).

In the report, dated April 7, Leahy also touched on the uncertain macroeconomic environment looming in 2023, but not before disclosing that CDW nearly doubled the size of its technical team since 2020.

According to social media posts, most of the affected positions appear to be in sales and delivery. It is unclear how many employees were affected.

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The Stamford, Conn.-based firm’s newest IT spending forecast report suggests that IT leaders are looking to optimize spending and using emerging technologies to transform their organization’s value proposition, revenue and client interactions. ‘

That spending is largely fueled by software and IT services, which Gartner predicts will rise by 12.3% and 9.1%, respectively. The software spending increase is due to organizations helping to increase productivity automation and other software-driven initiatives, while the services increase is driven by the infrastructure-as-a-service market, which is expected to reach over 30% growth this year.

Conversely, the spending on devices will decline nearly 5% this year as consumers defer device purchases due to declining purchasing power and a lack of incentive to buy.

“CIOs face a balancing act that is evident in the dichotomies in IT spending,” says John-David Lovelock, a distinguished vice president analyst at Gartner. “For example, there is sufficient spending within data center markets to maintain existing on-premises data centers, but new spending has shifted to cloud options, as reflected in the growth in IT services.”

The 5.5% growth in IT spending comes after the company’s January forecast suggested an increase of just 2.4%, with the company citing inflation impacting consumer spending along with an otherwise steady enterprise market.

Another reason for the increased spending on IT services is the lack of skilled IT talent, Gartner says. The demand for tech talent dwarfs the supply, and that is a trend that will continue until at least 2026, the firm says.

In fact, IT spending on internal services is slowing across all industries, and enterprises aren’t keeping up with wage increases, according to Lovelock.

“As a result, enterprises will spend more money to retain fewer staff and will turn to IT services firms to fill in the gap,” Lovelock says.

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Consumer purchasing power is taking the biggest hit, but overall IT spending is expected to remain strong as those two groups face different immediate economic futures, says John-David Lovelock, a distinguished vice president analyst at the firm.

Along with declines in consumer markets are layoffs at tech firms serving those markets, but CIOs are weathering the storm and keeping their budgets and planned investments intact

“A turbulent economy has changed the context of business decisions and can cause CIOs to become more hesitant, delay decisions or reorder priorities. We’ve seen this in action with the reshuffling taking place among some B2B companies, especially those that overinvested in growth. However, IT budgets are not driving these shifts, and IT spending remains recession-proof.”

According to Gartner, software and IT services are projected for the largest growth at 9.3% and 5.5%, respectively, while the devices segment is projected to take a 5.1% hit as both consumers and enterprises lengthen their device refresh cycles.

Lovelock says the pandemic forced both consumers and businesses to accelerate device refreshes and buy new devices due to remote work and education needs. Now, the lifespan of those devices will be extended, resulting in a declining device segment.

When Gartner previously issued its prediction in October 2022, devices were only forecast to decline 0.6%.

In addition to the technology market, the IT labor market is also being impacted by economic factors, as job vacancy rates have been increasing every quarter. The high competition for skilled IT staff is limiting growth for companies who rely on tech innovation to scale.

However, that is leading to growth in IT services as organizations are outsourcing their IT support. For example, Gartner forecasts spending on consulting to increase 6.7% in 2023.

“CIOs are losing the competition for talent,” Lovelock says. “IT services spending is growing more quickly than internal services in every industry. Skilled IT workers are migrating away from the enterprise CIO towards technology and service providers (TSPs) who can keep up with increased wage requirements, development opportunities and career prospects.”

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The analyst firm’s survey of global CIOs and technology executives finds that IT budgets are expected to increase 5.1% on average in 2023, but that is lower than the projected global inflation rate of 6.5%. Economic uncertainty, workforce issues and ongoing supply chain challenges are making their jobs even harder.

The bulk of the objectives for IT investments over the last two years were to improve operational excellence (53%) and customer or citizen experience (45%), while just 27% cited growing revenue as a primary objective. Similarly, just 22% said they wanted to improve cost efficiency with their technology investments.

CIOs are now being tasked with shifting their mindset and prioritizing digital initiatives with market-facing, growth impact, says Janelle Hill, distinguished VP analyst at Gartner.

“For some CIOs, this means stepping out of their comfort zone of internal back-office automation to instead focus on customer or constituent-facing initiatives,” Hill says.

However, Gartner says CIO’s future IT investments remain focused on optimization rather than growth, with top areas of increased investment for 2023 including cyber and information security (66%), business intelligence/data analytics (55%) and cloud platforms (50%). However, just 32% are increasing investment in artificial intelligence (AI) and 24% in hyperautomation.

Those CIOs that are focused on market-facing growth are more likely to leverage data, analytics and AI to detect emerging customer behavior or sentiment that represents a growth opportunity, Hill adds.

Gartner is also calling on IT leaders to reconcile siloed initiatives with a visual metrics hierarchy to communicate and demonstrate interdependencies across related digital initiatives. The firm’s study found that 95% of organizations struggle with developing a vision for digital change, largely due to competing expectations from different stakeholders.

To help accelerate delivery of IT investments, technology leaders need to be accountable and hold others accountable, according to Gartner. Hill uses the example of a digital investment designed to improve customer experience and profit margins. In this scenario, the CIO’s accountable partner would be the marketing or finance executives.

CIOs should connect with other leaders in their organization for each digital initiative to create metrics for that improvement and identify the chain of accountability.

Gartner also found that organizations have an over-dependence on IT staff for delivery of their tech investments, as 77% of CIOs said their IT staff is primarily responsible for providing innovation and collaboration tools, and just 18% said non-IT personnel provide those tools.

That mindset can impede agility, and CIOs must embrace democratized digital delivery by design to help accelerate that time to value. That strategy could include loaning IT staff to fusion teams that combine business experts, business technologists and IT that are focused on achieving digital business outcomes and opens the door to integrate business experts into a reciprocal IT-led fusion team.

CIOs continue to report challenges hiring and retaining IT talent needed to accelerate those digital initiatives, but some are looking at unconventional resources.

According to Gartner, 12% are using students through internships and relationships with schools, and 23% use gig workers.

“Talent shortages are among the greatest hindrances to digital,” says Sanchez Reina, VP analyst at Gartner. “CIOs are often limited by policies related to preferred providers or employment contracts. They must stress to business and HR leadership that engaging unconventional talent sources can help accelerate the realization of digital dividends.”

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The firm forecasts enterprise software to grow at a 11.0% clip in 2022 and 11.9% in 2023, good for the most growth of any segment over the next two years.  This reflects the already booming software-as-a-service market which helped grow the enterprise software segment by 14.4% in 2021.

According to Gartner, the cloud market within the enterprise software market became larger than the non-cloud market for the first time, largely due to the COVID-19 pandemic. Cloud-based software is now responsible for nearly all of the 11% spending growth expected in 2022, the firm says.

By 2025, Gartner expects the cloud market to be double the size of the non-cloud market.

Meanwhile, Gartner predicts that IT services — which includes managed services and consulting — will grow by rates of 7.9% and 8.8% in 2022 and 2023, respectively. That segment grew by 10.7% in 2021, according to the firm.

Read Next: IT Spending To Hit $4.5 Trillion in 2022

Organizations are expected to increase its reliance on external consultants, Gartner says, citing the urgency and accelerated pace of change that is widening the gap between organization’s IT ambitions and its internal capabilities.

In a statement, John-David Lovelock, distinguished research vice president at Gartner, says CIOs and tech decision makers are now in a position to move beyond the critical, short-term projects over the past two years and focus on the long term.

Lovelock says skills gaps, wage inflation and a competition for talent will push CIOs to rely more on outsourced services and consultancies.

“This will be particularly poignant with cloud as it serves as a key element in achieving digital ambitions and supporting hybrid work,” said Lovelock. “Gartner expects the vast majority of large organizations to use external consultants to develop their cloud strategy over the next few years.”

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Many organizations are still recovering from the pandemic, and many are willing to spend heavily on IT that has a clear tie to better business outcomes. That’s driving worldwide IT spending to increase to more than $4.2 trillion this year from the nearly $3.9 trillion in 2020.

That spending is also increasing ahead of revenues, reflecting a willingness of boards and CEOs to invest more in technology that can help their business.

That spending is expected to carry over into 2022, where Gartner is forecasting another 5.3% spending increase to $4.4 trillion.

Gartner: Cybersecurity Spending Tops Spending Priorities in 2021

Driving much of this increase in spending is enterprise software, devices and IT services, primarily due to a boost in infrastructure-as-a-service spending that supports mission-critical workloads and avoids high on-premises costs, Gartner’s report says.

Devices will grow the fastest – at a 13.9% clip to reach $794 billion. Next is enterprise software, which will grow 13.2% to about $670 billion.

Meanwhile, IT services will grow at a 9.8% clip to about $1.2 trillion.

Data center systems will reach $200 billion for an increase of 7.4%, and communications services will grow 3.5% to reach nearly $1.4 trillion.

“Technology spending is entering a new build budget phase,” said John-David Lovelock, distinguished research vice president at Gartner, in a statement. “CIOs are looking for partners who can think past the digital sprints of 2020 and be more intentional in their digital transformation efforts in 2021. This means building technologies and services that don’t yet exist, and further differentiating their organization in an already crowded market.”

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But where else should technology mangers, IT managers, or CIOs start when planning their departments’ budgets?

How to prepare an IT budget: build more than one

Mark Geary, managing director of Rally Point Consulting, says it’s hard to predict that which you’ve not already thought of.

“I think IT, security, connectivity, etc. should be a business-enabler first. That’s why you exist in IT. There should be no ‘box’ to think outside of. We all know how we work: we should have a plan A, B, AND C. You can switch your plan at the drop of the hat and re-associate budget for that plan.”

These plans should build on each other. Where everyone has been working from home, we’ve seen a lot at organizations who didn’t have enough VPN or other infrastructure to accommodate that.

“You look at what’s the most important thing to focus on at any given time. People tend to take a myopic view and not see the whole picture,” Geary says.

You should have a 5-year plan to add value to a business — but you should also be able to turn on a dime. This requires you to view budgeting as an ongoing, cyclical process which is never really “done.”

“Hard, frequent looks at spending in a world that changes monthly ensure that projects and programs are delivering exactly what is needed,” says Randy Gross, CIO of CompTIA.

Prioritizing a tech budget

What are the most important things in any IT department? Surely we could all more or less agree that connectivity, compute power, security, and availability (24/7/365) are the main areas of concern.

“What’s happened in the market and in companies is everyone finally saw that connectivity is an issue, but it’s always been an issue,” Geary says.

Security is a particularly important point in the SMB sector, where some managers think that their lack of resources means they should or must spend less on security. People want access to data, but many companies don’t often have an idea where their data is.

Every company has different in process, but transparency and constant communication should be shared from the executive level all the way to the techs.

Read Next: How IT Pros Can Determine Pricing

“Structure wise, ensuring that teams know where they stand allows for tremendous creativity in budgeting and carries on to operations,” Gross says.

“Look hard at tech projects in line with 12-month business goals and foster a stronger and deeper sense of partnership to be wise stewards of precious funds.”

Suffice it to say, a CFO will be busting your chops if you prioritize incorrectly, so it is important to first meet with them or any stakeholders and main contributors. Get a sense of where your organization is going by interviewing those who lead its various departments.

“Look at each executive’s plan and compare it to those four key areas of connectivity, compute power, security, and availability,” Geary says. “Think about how it enables business, because IT enables business; business doesn’t enable IT.”

For SMBs, CapEx vs OpEx has in many cases this year turned into looking at cash flow.

“Technology groups need to look hard at burn rates more than ever and plan work in ways that are more modular and adaptable to market dynamics,” says Gross.

Common issues in IT budgets

IT has so many different functions. They’re responsible for the “Run Environment” — how to keep operations moving. The challenge is how to create innovation, represent it financially, and encouragement alignment across the business to achieve it.

Yet, Geary says the biggest mistake he sees managers make in their budgeting revolves around the people who are overly tactical.

“They’ll say, ‘oh no, we need this and that,’ but if it is a last minute, thoughtless request, generally it isn’t really needed for the business. Don’t get too granular here unless there’s a specific need that you know your company needs to meet the above four key areas.”

Gross agrees entirely, and adds that budgets should never be too rigid.

“I’d caution against anything that is rigid. Companies can remain aggressive but need the constant feedback internally and externally to evaluate resource alignment,” he says.

Jeff Day, North of 10 Advisors, says the other key issue is not talking to other department heads.

“I see many IT executives who are, for the first time, only now rallying their counterparts for strategic planning. An IT leader who doesn’t have regular meetings with CEOs, CIOs, heads of marketing, etc. is not going to perform well for their company.”

This article was originally posted on September 30, 2020.

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That’s a mistake.

“Honestly if your video goes down in a meeting you can keep going, but if your audio goes down you’re going to have to call back later,” says Justin O’Connor, education specialist and instructor for Bose Professional, Global Training.

Still, a study by sister site Commercial Integrator shows that most organizations don’t budget appropriately for meeting room audio. Take loudspeakers, for example. Nearly a third of responding integrators and consultants say typical clients don’t budget accordingly for speakers. Then another 66 percent are only “somewhat likely” to dedicate enough budget for meeting room speakers.

Similarly, when it comes to microphones, 35 percent are unlikely to budget properly. Then another 49 percent are only “somewhat likely.”

O’Connor understands why so many technology managers and IT directors choose to over-prioritize visually compelling elements such as video screens versus meeting room audio. “Video displays are big. They are flashy. They’re beautiful,” he says in a Commercial Integrator video interview.

Lighting fixtures. Even the table. “These are things you can actually see, and I think they get a different level of attention,” he says.

Adding to the conundrum is the fact that tech managers tend not to want to see the audio.

In the case of speakers, which are often relegated to the ceiling, they need to compete for ceiling space with a projector, sprinkler heads, some detectors, lighting fixtures, HVAC and whatever else. It’s this very dilemma that played a role in the development of Bose Professional EdgeMax loudspeakers, O’Connor explains.

“EdgeMax is designed to be mounted in the ceiling but specifically at the edge of the room,” he says.

“We have a proprietary phase guide so once you get those speakers at the edge of the room the phase guide actually make sure that they shoot horizontally and down. They don’t spray anything against the wall that they’re up against. It [creates] an even listening plane.”

Time to Rethink That Meeting Room Audio Budget

Nobody is saying it’s easy to be responsible for a meeting room audio budget. It’s natural for tech managers to want to be able to point to value and return on investment.

As O’Connor points out, it’s easy to recognize that a dollar amount spent equates to a certain size of a video display. It’s easy to point to features such as 4K and 8K. It’s logical to tie a dollar amount to the size of a table.

It’s harder, O’Connor says, to pinpoint audio value. Not every technology manager will understand why the $12 ceiling cans they can find online won’t deliver the return on investment that a higher quality solution will.

That is, until it’s too late.

Related: How Bose Professional Headquarters Handles Its Own Meeting Room Audio

The original version of this article appeared on sister site Commercial Integrator. 

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