Economic Downturn: Big Concern for Execs

One question I always like to ask during a one-on-one interview with executives is: What is keeping you up at night? The answer to this question will inform decisions made in the organization and which technologies are ultimately implemented.

This is why my interest was piqued when I was reading through Gartner’s second quarter 2022 Emerging Risks Report, which was published in July. Concerns about a macroeconomic downturn has rapidly ascended into the top emerging risk facing organizations today. What’s more, there is a high degree of interrelated risks that need to be addressed.

Gartner actually surveyed 306 senior executives and risk management professionals in the second quarter of this year to conduct this report. Here’s what is interesting. All five top emerging risks in the second quarter are external to the organization and can have significantly different impacts based on geography and industry.

The top five emerging risks in the second quarter of 2022 are as follows:

  1. Macroeconomic downturn
  2. Escalation of conflict in Europe
  3. Cyber attacks
  4. Energy price inflation
  5. Key material shortages

The reality is risk is simply, just risk. But if we aim to embrace it, we can then take the steps to address these risks. If we turn to technology, we then have an opportunity to expand marketshare and remain highly competitive.

Perhaps it shouldn’t come as a surprise then that a forecast published by Gartner in the same month suggests CIOs’ investment plans are not expected to be deterred by inflation or currency volatility. The analyst firm expects worldwide IT spending to blossom some 3% before the end of 2022. Sure, that is still a much slower pace than in 2021, but recession or not, there is still growth expected, even amid a very tight market. CIOs expect to spend and that is significant in the bigger picture.

Gartner suggests price increases and delivery uncertainty, intensified by the Russian invasion of Ukraine, have accelerated the transition in purchasing preference among CIOs, and enterprises in general, from ownership to service. This means we are seeing cloud spending grow 18.4% this past year (2021) and projections have growth slated at 22.1% before the end of 2022. Not only is cloud service demand reshaping the IT services industry, but it is also driving spending on servers to 16.6% growth in 2022, as hyperscalers build out their data centers.

Spending on data center systems is forecast to experience the strongest growth of all segments in 2022 at 11.1%. 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.

Another interesting trend—which I recently mentioned on The Peggy Smedley Show—is the critical IT skills shortage being felt across the globe. As such, CIOs will need to balance the increased IT demand with the lower IT staffing labors. While different incentives will appeal to different employees, compensation is still the No. 1 driver for IT talent attraction and retention, according to the Gartner Global Labor Market Survey.

Technology service providers are increasing prices on IT to allow for competitive salaries. This is driving an increase in spending in software and services through 2022 and 2023. Digging into the numbers a bit deeper, worldwide software spending should spike almost 10% to $806.8 billion in 2022 and global spending on IT services is forecast to reach $1.3 trillion.

All in all, it is an interesting time in business. A confluence of factors is requiring executives to nurture people, process, and technology to remain competitive in tight market. Perhaps the trillion-dollar question now is, what is your company doing to prepare itself succeed?

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