2024 IT Budget Growth is Slowing   

Data From ETR's Macro Views Survey

Erik Bradley | ETR Research 

| March 28, 2024

In ETR’s most recent Macro Views survey, which tracks budget growth, spending priorities, and other high-level metrics impacting the enterprise technology marketplace, the preliminary data has captured a meaningful revision lower on anticipated 2024 IT spending estimates.

Top Takeaways:

  • Preliminary data from ETR's Macro Views survey indicates a revision lower on anticipated 2024 IT spending estimates, with full-year IT spend estimated to grow at 3.2% compared to the previous expectation of 4.3%. ​
  • Q1 spend has already shown a lower growth rate of 1.5% compared to the anticipated 2.4% growth. ​
  • The survey operations team found no anomalies in the survey period, with a high repeat respondent rate of nearly 80%. ​
  • ETR's data-driven numbers have historically been lower than analyst-driven predictions, as they rely on active IT practitioners and decision-makers rather than qualitative input from CxOs. ​
  • The decrease in IT spending may be attributed to factors such as change fatigue, rising inflation, lower GDP estimates, rising consumer debt, and a creeping unemployment rate, which have led to decreased optimism in the macroeconomic environment. ​

Full-year IT spend is estimated to grow at 3.2% for 2024 versus expectations of 4.3% captured in the prior survey iteration back in January. This decline is already playing out in Q1 spend, which is reported at 1.5% growth, lower than the 2.4% anticipated just three months ago. Since the preliminary April 2024 Macro Views data has been published on our research platform, there has been keen interest (and some rebuke) among ETR clients and community members surrounding the most recent budget numbers for IT spending in 2024; however, there are a few things to consider when examining this data.

First and foremost, it is important to note that this is preliminary data, and approximately 200 submissions are still expected to populate the platform. Therefore, there is reason to anticipate a slight change to the current 3.3% 2024 IT budget growth rate. However, the descending directionality is likely to remain, so there will be a material revision lower than the anticipated 4.3% annual budget growth captured during the JAN24 TSIS period.

Second, it is important to consider the historical accuracy of macro-budget growth estimates. ETR’s data-driven numbers are submitted by active IT practitioners and decision-makers and have historically been lower than analyst-driven predictions. This is due to the data-driven aspect as opposed to an analyst-driven aspect, which tends to rely heavily on qualitative input from CxOs. ETR’s macro data is impartial to sentiment or opinion and has historically proven to be directionally accurate, which is how we advise our clients and community members to view this data point.

Before we discuss potential reasons for this denouement in spending optimism, let’s examine the data by demographics (see the chart below).

In the data visualization from ETR’s research platform above, we see that among all Enterprise Size and Job Title cuts, the current full-year budget growth rate is slower than it was in the prior survey period captured in January 2024. Only Financial/Insurance organizations remain in line with prior survey estimates among industry verticals. All other verticals have revised their spending expectations lower. North American and EMEA respondents follow suit with a downward trajectory in their spend, while the lower citation base of Latin America and APAC respondents remain more generous in their anticipated spend.

With the data revealed, let’s attempt to postulate why the data is decelerating. As we like to say at ETR, the data will tell you what is happening, but it doesn’t always tell you why. For that, we rely on our community of IT decision-makers who take our surveys, participate in our interviews and panels, and populate our industry-leading IT expert network. Based on the feedback from our community of IT experts, it seems very realistic that the optimism we captured back in December and January has waned. In fact, even Gartner has already revised its 2024 full-year IT spend number lower, from an extremely lofty 8% growth estimate back in October of 2023 to 6.8% now. In Gartner's neologistic fashion, they even coined a term called “change fatigue” a while back and are offering that as a reason for their quick IT spending revision.

Whatever you want to call it, there are several potential reasons for this decrease in spending that should be explored further. Based on numerous ITDM interviews and conversations with ETR’s financial services investor clients, much of the ETR community was already hesitant to believe some of the industry analysts' bullish estimates, relying instead on their own channel checks and expert network calls. Most spending increases at the moment seem to be driven by inflationary price increases that the entire economy is facing and not net-new investments. One of ETR’s ITDMs recently stated, “There’s a slight uptick in the most current fiscal year…around 2%. Particularly around cybersecurity, there have been price increases that we've had to absorb…but the dollar doesn't go as far today as it did yesterday."

Based on these conversations, the economic outlook seems to be the major reason that full-year IT spending may be cooling. The macro backdrop has clearly altered from the December 2023-January 2024 period. Facing the turn of the calendar, we had initial expectations for a calendar full of Fed rate cuts. Now, after the most recent decision to stand pat this week, the markets are factoring in the reality of only a few cuts for 2024. In addition, most published GDP estimates have also been revised lower throughout the year. Other factors include rising consumer debt, persistent inflation, job numbers being revised lower, and a creeping unemployment rate. All of this, in sum, points to decreased optimism in the macroeconomic environment, particularly when compared to the optimism exhibited at the turn of the 2023/2034 calendar. All told it is not surprising to see all of these factors flowing down to impact budget spending.

So, while we understand the keen interest from our ETR community and agree that the current IT budget growth number may seem concerning, it is important to recognize that the estimates are coming from the IT decision makers themselves and are accurately sound based on the survey methodology. We cannot determine the exact reasoning, but possible explanations are plentiful. Whether it is the hype of GenAI not panning out quickly enough to continue allocating new budget dollars towards those initiatives, the macro data perpetuating concerns of this long-looming recession, or the “change fatigue” that Gartner is pushing, the full-year 2024 IT spending is clearly descending from the levels that ETR captured in December of last year.

ETR’s April 2024 Technology Spending Intentions Survey (TSIS) will officially close polling on April 4th, and the ETR team will host its Macro Views Webinar on Friday, April 12th. The complete April 2024 TSIS Findings Webinar will follow a week later on Friday, April 19th. While the webinars are exclusive for ETR clients and community members, if you would like to gain access, you can reach out to our team via email at service@etr.ai or start your own free trial.  

Enterprise Technology Research (ETR) is a technology market research firm that leverages proprietary data from our targeted IT decision maker (ITDM) community to provide actionable insights about spending intentions and industry trends. Since 2010, we have worked diligently at achieving one goal: eliminating the need for opinions in enterprise research, which are often formed from incomplete, biased, and statistically insignificant data. Our community of ITDMs represents $1+ trillion in annual IT spend and is positioned to provide best-in-class customer/evaluator perspectives. ETR’s proprietary data and insights from this community empower institutional investors, technology companies, and ITDMs to navigate the complex enterprise technology landscape amid an expanding marketplace. Discover what ETR can do for you at www.etr.ai