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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IT analyst firm Gartner says global government IT spending will hit nearly $589 billion in 2023, an increase of 6.8%, as governments look to improve the citizen experience and engagement. New investments will aim to improve access to digital services and help agencies manage employee and citizen interactions, a category Gartner calls the total experience (TX) framework.

The firm says a cohesive TX strategy will also help governments advance digital skills and literacy in their workforces by providing modern tools and approaches to lessen friction in government work. Failure to do so will increase friction and lead to delays and an overall underwhelming experience.

Government IT spending is projected to increase across all categories except devices, as governments will look to extend the life of their devices acquired at the onset of the COVID-19 pandemic.

Meanwhile, software is projected to grow at the highest clip at a growth rate of 12.5%, reaching more than $183 billion. IT services come in as the second-highest growth area with a projected spending increase of 7.9%. Internal services will grow 2.2%, Gartner predicts.

The analyst firm says initiatives such as migrating services to the cloud, modernizing applications and fortifying network security are among the top innovation priorities that government IT professionals are focused on to improve public engagement and satisfaction.

Gartner’s 2023 CIO and Technology Executive Survey found that government CIOs are most concerned with digital transformation, leveraging and using data effectively, and technology modernization.

Apeksha Kaushik, principal analyst at Gartner, says delivering on those three priorities depends on establishing a shared, organization-wide digital vision and integrating that vision into enterprise-level strategies.

“In alignment to these priorities, investments will increase in cybersecurity, application modernization, cloud platforms, integration technologies such as artificial intelligence (AI) and machine learning (ML), and business/data analytics tools,” Kaushik says.

Meanwhile, CIOs will have to tackle other challenges, such as varying stakeholder expectations and developing action plans accordingly.

“Government CIOs will need to address concerns of digital transformation with mission objectives. They need to work closely with government executives to ensure a shared understanding of vision, roadmap and linkage to mission critical priorities,” added Kaushik.

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In fact, the IT research and consulting firm says enterprise IT budgets will be recession proof as executives look to increase IT investments rather than cutting budgets. According to the firm’s survey of 200 chief financial officers, nearly 70% plan to increase spending on digital technologies.

Worldwide IT budgets are expected to hit $4.6 trillion, with much of that 5.1% projected growth fueled by an 11.3% increase in software spending, boosting that category to a total of nearly $880 billion.

Highlighted by Gartner, spending on data center systems is projected to rise 3.4% to $216 billion as organizations continue to maintain existing on-premises data centers, but the large rise in software expenditures reflects a continued shift to cloud options.

Also fueling the overall increase is a projected increase in technology services spending of nearly 8%, bringing spending in that category to nearly $1.4 billion.

Conversely, spending on devices is expected to fall for a second straight year, with the projected 740 billion in spending on devices representing a 0.6% decrease after falling 8.4% last year. This comes after spending on devices increased by 15.8% as the pandemic fueled a rise in remote work and necessary devices.

Organizations plan to use new technology investments to reshape their revenue stream, add new products and services and change the cash flow of existing products and services. In addition, organizations plan to change the value proposition of existing products and services, says John-David Lovelock, a distinguished vice president analyst at Gartner.

“This trend has fed the shift from buying technology to building, composing and assembling technology to meet specific business drivers,” Lovelock says. “This shift is foundational to the growth of cloud over on-premises for new IT spending.”

“However, as organizations look to also realize operations efficiency, cost reductions and/or cost avoidance during the current economic uncertainty, more traditional back-office and operational needs of departments outside IT are being added to the digital transformation project list,” he adds.

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The difficulties of vulnerability management in DevSecOps

New research from vulnerability management platform company Rezilion shows that 66% of organizations are dealing with a massive backlog of vulnerabilities, with 66% saying their backlog consists of more than 100,000 security bugs. Further, more than three-quarters of respondents say detecting and remediating just one vulnerability in takes at least 21 minutes, and 80% say their organizations spend more than 16 minutes to detect just one bug in production.

Read Rezilion’s report on vulnerability management in DecSecOps.

CISA, NSA publish advisory on operational technology and industrial control system defense

The U.S. Cybersecurity and Infrastructure Agency along with the National Security Agency have issued an advisory about control system defense for operational technology and industrial control systems to give owners and operators an understanding of tactics, techniques and procedures used by threat actors. The information builds on previous guidance released in 2021 and 2020.

The agencies say the advisory is designed to help secure critical infrastructure and protect assets from cyberattacks, including from nation-state groups and others that target these systems to achieve political gains, economic advantages or destructive effects.

Read the joint advisory.

SMBs investing in tech to support innovation

A new report from CompTIA shows that U.S. small and mid-sized businesses are shifting their tech investment strategies and are hiring skilled tech workers to drive innovation. The study shows that 28% of SMBs want to spend on tech that boosts innovation, compared with just 19% in 2021. Further, 39% want to hire additional tech staff this year, compared to just 25% that said the same in 2021.

About half of SMBs surveyed say their tech spending level if just right, 22% say it’s too high, and a quarter don’t believe they’re spending enough on tech.

Read more about SMB tech spending.

Gartner IT Symposium/Xpo set for next month

The Gartner IT symposium/Xpo will be held Oct. 17-20 at the Walt Diskey World Swan and Dolphin Resort. The IT research giant says over 8,000 CIOs and IT leaders will attend the four-day conference to hear from over 140 Gartner experts and 185 solution providers in more than 500 sessions. Keynotes will include

• Julie Sweet, Chair and CEO, Accenture
• General David H. Petraeus, Director, CIA (2011-2012), Commander of U.S. and International Security Assistance Forces-Afghanistan (2010-2011); Partner, KKR
• Mike Krzyzewski, Head Men’s Basketball Coach, Duke University (1980 – 2022)
• Nicole Malachowski, First Woman Thunderbird Pilot; Combat Veteran, Fighter Squadron Commander; White House Fellow and Adviser
• Emmanuel Acho, NYT Bestselling Author, Emmy Award Winner, Host & Fox Sports Analyst

Learn more about Gartner’s event.

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With expanding business, IT companies must procure products and services from others to continue their operations. Examples include hardware and software, marketing services, printing, office supplies, professional services and other kinds of products and services as per the requirement of different projects. 

Managing these spending categories monthly or on a project basis becomes a tedious task for procurement and accounting departments. Preparing purchase requisition forms, getting necessary approvals, placing orders, and clearing vendors’ payments require both time and effort. Above all, if done manually, these processes can have multiple human-prone errors that are even more time-consuming and costly.

Digital procurement systems such as purchase-to-pay software systems can solve all these problems. It can streamline the procurement process by letting employees select items digitally, get faster approvals, provide three-way matching of requisition form, purchase order, and goods receivable note, and provide an option to pay vendors digitally within the specified time.

Benefits of Digital Procurement System

Let’s talk about how a digital procurement system can help IT companies in the following spend categories:

Software Subscriptions 

According to a Gartner report, all new companies and 80% of existing suppliers will provide subscription-based revenue models by 2020, regardless of where the software sits. Being an IT company, you rarely make in-house software as they are costly and time-consuming. Instead, an IT company buys software that is tried and tested by other specialized companies. 

Software expenditures have shifted from one-time licenses to a subscription-based approach, adding to the complexity and volume of transactions in procurement. A marketing department alone might be using several subscription-based software to manage their campaigns and social media platforms. 

Related: IT Spending On Cloud To Surpass Traditional IT In 2025

Procurement software helps optimize subscription utilization by calendarized upcoming pending and renewal subscriptions. In addition to that, it is a huge time-saver when it comes to recurring billing. It also allows managers to allocate the software to relevant teams and departments. A good procurement software also helps to pause and resume subscriptions when teams do not need them at the moment. 

It also helps in creating a catalog of all the software subscriptions through which employees could choose which software to go for when they require specific service. Moreover, IT companies can get relevant reports and analytics on software usage to make data-driven decisions.

Office Supplies 

Every company needs office supplies to support its functions and provide facilities to its employees. Office supplies can include chairs, tables, pens, pencils, notepads, etc. Companies order such materials in bulk for every department in the company. Office supplies come under the indirect expense of the company, which is not adequately addressed in many companies because of their not-so-direct role. 

According to Mckinsey, effective indirect procurement management can contribute up to 12% of cost savings. In other words, managing purchases related to office supplies can help IT companies reduce high costs. S2P software can help source the best vendors for different stores and onboard vendors that provide durable and cost-effective office supplies. Moreover, if you want to purchase again, S2P can have all the information saved, which can help in making future decisions.

Advertising and Marketing 

Whether you create an advertisement or organize a company event, IT companies need to outsource such activities to other agencies with expertise in the area. Numerous other activities, such as content management, SEO optimization, media buying, digital marketing software, video production, market research, and branding, are outsourced and paid for. Thus, procurement needs to be involved in facilitating this department as well.

As per Delloite, marketing spend is expected to grow by 20%. Handling such massive expenses can be a tedious task. Procurement software can help with all these spending issues effectively and efficiently. 

First of all, managing all these vendors without a vendor management system is tiresome. Procurement software can help consolidate vendors offering similar services with relevant background information. Secondly, contract management and future negotiations can be made easy with automation. Moreover, it can help control the expenditure by providing better visibility and transparency into what is happening and who is in charge. 

Professional Services 

Companies might need to hire professionals to perform specialized tasks such as accountancy firms, law firms, painting the new office, or even pest control. Since digital procurement help obtains the experience of supplier and monitor supplier performance, it can guide the procurement department of IT companies on which vendor to go for.  

Among all the benefits of managing services provided by other vendors, digital procurement can help view the expense of certain professional services with the help of graphs and visual aids. 

This way, companies can better understand where their company is spending heavily. If the expenditure increases from a specific limit, upper management needs to make certain decisions like hiring a full-time resource or looking for other options.

Expense management 

Digital procurement helps with expense management by keeping departments in line with the pre-determined budget. Procurement systems provide real-time budget information that allows tracking any budget variances that may arise. A real-time control system enables action before issues appear or occur in your purchasing operations, hence preventing financial losses.

In addition, digital procurement software enables procurement departments to catalog pre-approved items so that employees can only purchase materials necessary for the company’s operations. Moreover, with multiple approvals, no purchase can go unnoticed. This limits maverick spending and dark purchasing in the organization, reducing unnecessary costs.

Greater Visibility in Managing Spend

In short, managing direct and indirect spend is necessary for all types of companies. Most of the companies are writing checks wondering if the purchase is needed or not. If a company does not know where it is spending money, it may not be able to manage it. Hence, the most effective way to control spending is to have greater visibility. 

To keep ahead of the competition, businesses should automate time-consuming procurement tasks. Procurement software can help link the expenditure with relevant departments and teams. It controls maverick and dark purchasing and removes costly human errors from the procurement process.

The post How Can IT Companies Manage Their Spend With Digital Procurement appeared first on My TechDecisions.

John-David Lovelock, a distinguished research vice president at Gartner, says inflation and currency exchange rates are not expected to deter CIOs’ investment plans for 2022. “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,” said Lovelock, in a statement.

With price increases and delivery uncertainty, CIOs, and enterprises in general, are shifting from ownership to service models. In 2021, there was 18.4% growth in cloud spending. In 2022, cloud spending is expected to grow 22.1%. Gartner says the cloud service demand is reshaping the IT service industry, but it is also driving spending on servers as hyperscalers build out their data centers.

Spending on data center systems is expected to have the strongest growth of all segments in 2022, according to Gartner. Cloud consulting and implementation and cloud managed services are expected to grow 17.2% in 2022, from $217 billion in 2021 to $255 billion in 2022, helping to drive the overall IT services segment to 6.2% growth in 2022.

IT Talent Shortage Affects IT Spending

Gartner predicts the IT skills shortage to ease by the end of 2023. By that time, the corporate drive to complete digital transformation will slow down, leaving time for more upskilling and reskilling of existing staff. However, Gartner notes in the near term, CIOs will be forced to take action to balance increased IT demand and dwindling IT staffing levels.

Gartner’s Global Labor Market Survey in the first quarter of 2022, showed compensation as the number one driver for IT talent attraction and retention. Tech service providers are increasing prices to allow for competitive salaries; in turn, thus will driven an increase in spending in software and services through this year and next year. Gartner says worldwide software spending is expected to grow 9.6% to $806.8 billion in 2022 and global spending on IT services is forecast to reach $1.3 trillion.

“Additionally, CIOs are using more IT services to assist in the lack of skilled IT staff. Tasks that require lower skill sets tend to be outsourced to managed service firms to alleviate staff time, while critical strategy work, which requires high-end skills unobtainable by many enterprises, will increasingly be fulfilled by external consultants,” said Lovelock.

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Despite “one of the noisiest years on record” for CIOs, who are dealing with geopolitical disruptions, inflation, currency fluctuations and supply chain challenges, IT decision-makers are accelerating their IT investments to tap into new and emerging technologies that can help them adapt to these volatile condition, the research and analyst firm says.

Specifically, CIOs are focused on investing in analytics, cloud computing, customer experiences and security, Gartner says, adding that inflation impacts on hardware from the past two years are finally beginning to subside and spill over into software, where spending is forecast to grow 9.8% this year and 11.8% next year.

In addition, Gartner says technology service providers are increasing prices due to a lack of IT talent and more competitive salaries, which is helping to drive spending on IT services up 6.8% this year and 8.5% next year.

Gartner’s analysis of IT spending over the next two years demonstrates that the path toward digital transformation takes longer than two years, with IT spending rising and forecasted to rise significantly in each year since the pandemic.

“For example, infrastructure as a service (IaaS) underpins every major consumer-focused online offering and mobile application, accounting for a significant portion of the almost 10% growth in software spending in 2022,” the firm says it its analysis.

Further, digital business initiatives such as user experience and supply chain optimization should push spending on enterprise applications and infrastructure software into double-digit growth in 2023.

Meanwhile, the Russia-Ukraine crisis should not have a direct impact on IT spending. Instead, price and wage inflation, talent shortages and other delivery uncertainties will have greater ramifications this year, according to Gartner.

However, IT investments should go on as planned, with CIOs having the financial and organizational ability to invest in key technologies throughout the next two years, says John-David Lovelock, distinguished research vice president at Gartner.

“Some IT spending was on hold in early 2022 due to the Omicron variant and subsequent waves but is expected to clear in the near-term,” Lovelock says. “CIOs who keep their eye focused on key market signals, such as the shift from analog to digital business and buying IT to building it, as well as negotiate with their vendor partners to assume ongoing risks, will fare better in the long-term. At this point, only the most fragile companies will be forced to pivot to a cost cutting approach in 2022 and beyond.”

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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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That follows the IT research giant’s forecast of 9.5% growth this year, which was driven by large increases in spending across the board.

Gartner announced its IT spending forecast this week during its virtual IT Symposium/Xpo 2021, a four-day virtual event that features insights on current IT trends from the organization’s researchers, experts and technology companies.

According to Gartner, enterprise software will have the highest growth in 2022 at 11.5%, which the organization says is driven by infrastructure software spending, which is outpacing application software spending.

Download our IT Pro guide on budgeting 

Meanwhile, spending on devices is expected to tick up 2.3% in 2022, after increasing 15.1% in 2021 due to the pandemic and the demand for remote work technologies. The increase next year is driven by enterprises that upgrade devices and/or invest in multiple devices to thrive in a hybrid work setting, according to Gartner.

Elsewhere, spending will grow 5.8% in 8.6% in IT services, 5.8% in data center services, and 2.1% in communication services.

John David Lovelock, distinguished research vice president at Gartner, said in a statement that enterprises will increasingly build new technologies and software rather than buy and implement them, which will lead to overall slower spending levels in 2022 compared to 2021.

“However, digital tech initiatives remain a top strategic business priority for companies as they continue to reinvent the future of work, focusing spending on making their infrastructure bulletproof and accommodating increasingly complex hybrid work for employees going into 2022,” he said.

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