Here’s a sample of key findings from this year’s report based on a survey of 506 IT executives from around the world. Scroll to find out more about current trends in technology spend.
IT waste estimates improve
Investments in artificial intelligence surge
Poor data quality hinders decisions
IT vendor pricing increases
IT work-from-home rates plunge
This Pulse provides a high-level perspective on technology and spend issues that concern senior procurement and IT leaders as they develop strategies and make decisions that influence the trajectory of their businesses.
506 technical professionals and executive leaders worldwide participated in the Flexera 2023 Tech Spend Pulse survey in the summer of 2023. Survey participants include professionals across industries and context areas. All numbers and percentages are rounded to nearest whole number.
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This year’s survey targets organizations with more than 2,000 employees, with nearly half (46%) exceeding 10,000 employees.
Similar to previous years, more than two-thirds of respondents were from the Americas, with the vast majority of those from the U.S.
European respondents comprised 29% of the total respondent pool, with the UK contributing 12%.
Cybersecurity (76%) and cloud/cloud migration (75%) are top of mind for respondents. Digital transformation (74%) followed closely behind.
While digital transformation is still a critical initiative, the use of open source software (OSS) and the explosion of artificial intelligence underscore the importance of security prioritization.
The largest year-over-year (YoY) changes were the increase of cloud/cloud migration (from 65% to 75%), business value/growth (from 47% to 54%), cost savings/optimization (from 39% to 53%) and modernize/reduce technical debt (from 27% to 40%).
Interestingly, there was no decline in any initiatives from 2022 to 2023, suggesting that IT is layering new initiatives onto already existing ones.
While cloud initiatives have experienced a notable shift in priority, cybersecurity continues to dominate the agenda, underscoring the critical need for immediate action in safeguarding digital assets. This enduring focus on cybersecurity signals an industry-wide acknowledgment of its vital role in today’s digital landscape.
Amid the backdrop of economic uncertainty, which recently has seen tech layoffs in various sectors, the influence of remote work on digital transformation efforts dropped from 74% to 39% YoY as employees returned to offices. Meanwhile, IT budgets surged from 58% to 73% YoY, influenced by greater cloud adoption, which often requires significant initial investments.
Work from home plummeted from 74% to 39% YoY
When asked about the level of IT spend, the percentage of respondents spending over $500 million USD annually increased from 14% to 19% YoY.
Nearly one in five respondents spend half a billion dollars on IT
But regardless of an organization’s headcount, IT spending varies considerably. Over a third (34%) of enterprises with more than 10,000 employees spend upwards of $500 million annually.
Overall, respondents’ organizations spend 12% of their revenue on IT, with enterprises in the Americas spending more than their European counterparts.
Previous Flexera industry reports have shown estimated wasted spend around 30%. Respondents in this year’s Tech Spend Pulse indicated an improvement in wasted spend across desktop software, data center software, SaaS and IaaS/PaaS, which likely stems from organizations implementing cost optimization measures.
However, these figures are respondent estimates, not precise values, possibly influenced by optimistic views as enterprises continue to refine cost-saving processes.
Estimated wasted spend is improving
Enterprises with more than 10,000 employees nearly doubled the percentage of revenue spent on IT, from 6% to 11% YoY. Organizations with 5,001 to 10,000 employees also increased IT spend from 8% to 13% YoY.
The largest organizations nearly doubled their percent of revenue spent on IT
It’s no surprise that technology companies, seeking continued innovation, spend more of their revenue on IT. Product-related industries are more focused on the production of physical goods and therefore spend less.
Respondents report spending 60% of their IT budget on software, which includes 37% spent on SaaS.
Across the board, more than half of respondents expect IT budgets to slightly increase. Expectations of significantly increasing IT budget dropped by more than half from last year (from 13% to 5% overall).
Leverage ITAM, SaaS cost management and FinOps tools to build a blueprint of your IT estate, ensuring you have complete visibility to keep costs down.
Industry analysts often estimate the costs of running the business to be as high as 70%, which aligns with respondents’ estimates of 67%.
Decentralization of IT spend has remained flat over the past two Tech Spend Pulses, with 26% of spend controlled by business units (up from 25% YoY) and 74% by central IT (down from 75% YoY).
As enterprises shift to the cloud, many are attempting to reduce the number of data centers they own and operate. Eight percent plan to eliminate data centers entirely, and 61% plan to reduce their data center footprint to some degree.
Nearly two-thirds of respondents are reducing their data center footprint
Respondents expect a massive increase in artificial intelligence (AI)/machine learning over the next twelve months, with 32% expecting a significant increase and 44% expecting a slight increase. Public cloud (IaaS/PaaS) spend is expected to increase (69%) along with SaaS (77%).
Data centers, servers and storage systems are projected to see the most significant declines.
In an uncertain economic climate, nearly one-third of respondents expect significant increases in AI budgets
As IT spend shifts more toward SaaS, cloud and other non-on-premises resources, visibility into that spend becomes more challenging. New tools and processes are required to keep track of all IT assets in the organization—and how much the business is spending on those assets.
More than two-thirds struggle with cost visibility across SaaS, cloud and on-premises assets
When questioned about their biggest IT decision-making challenges, respondents indicated too many decisions/complexity of decisions and decisions taking too long to make were the top challenges (81%). Not enough good quality data also continued to be a top challenge.
80% view not having good quality data on IT spending as a top challenge
Making sound business decisions requires comprehensive IT visibility and data you can trust. A lack of insight into your hybrid IT estate can complicate the decision-making process and delay strategic initiatives.
For the first time, more than 90% of respondents chose the same top challenge: increased prices from vendors. The number-two challenge—ensuring spend efficiency—increased from 81% to 87% YoY.
For the first time, 9 of 10 respondents cite increased prices from vendors as a top challenge
This year’s survey questioned respondents about their current and future use of leading technology vendors across traditional on-premises software, SaaS and public cloud.
With products that touch virtually every part of the IT stack, Microsoft takes the top spot on this list year after year, and over half of respondents (54%) said the vendor is their largest by spend. AWS increased from 21% to 27% YoY, and SAP increased from 13% to 21% YoY.
More than half of respondents named Microsoft as their top vendor
Major vendors sell a mix of on-premises, SaaS and cloud software. To reduce your costs, you need comprehensive visibility across your entire hybrid IT estate. You can’t make strategic, data-driven decisions about what you can’t see, and without insight into technology assets you’ll miss out on optimization opportunities.
The pendulum has swung back to full-time in office (30%) as the most common IT staffing structure, up from 26% last year. The largest YoY gain was full-time with partial remote, which increased from 16% to 27%. Full-time remote dropped significantly from 45% to 23% YoY.
When asked about changes to investments in IT staffing, respondents indicated that upskilling (76%) and reskilling (61%) of existing employees are top initiatives that will increase. The dependence and focus on remote workers dropped significantly from 72% to 39% YoY.
Companies prioritize training their existing staff
Similar to last year, enterprises are increasingly utilizing technologies that offer supplemental functionality but require specialized skillsets and training. Artificial intelligence/machine learning leads the pack, increasing from 59% to 68% YoY.
Notably, organizations are less dependent on external resources for some tasks as they gain experience and are able to bring these in-house, such as with cloud operations (down from 60% to 53% YoY) and DevOps (down from 48% to 43% YoY).
More than two-thirds plan to increase external artificial intelligence/machine learning resources
This section highlights responses gathered from European respondents, which represent approximately 29% of the total respondent pool.
The distribution of the European respondents by organization size closely mirrors that of the global respondents. More than half (59%) of European respondents are from organizations with over 10,000 employees.
Financial services, industrial products and retail and eCommerce are the three most represented industries for European respondents.
Similar to global results, cybersecurity, cloud/cloud migration and digital transformation are the top European IT priorities.
European respondents spend 10% of revenue on IT, compared to 12% globally.
European respondents are expecting very similar changes in IT budgets as their counterparts in the Americas. Overall, the percentage of European respondents reporting an increase in IT budgets dropped from 70% last year to 59% this year.
Organizations continue to decrease investment in legacy on-premises technologies while increasing spend in cloud and SaaS. In Europe, technology investments are expected to increase the most around SaaS (81%) followed by artificial intelligence/machine learning (77%).
Additionally, emerging services continue to see the most significant gains among European respondents, as seen with artificial intelligence/machine learning and automation.
of European respondents expect to significantly increase investment in artificial intelligence/machine learning
Similar to global results, there is a significant decrease in work from home among European respondents (80% to 37% YoY). Concerns about business continuity dropped significantly (63% to 40% YoY).
Europeans are heading back to the office
European organizations are getting more comfortable with the cloud as they gain experience with the disaster recovery/business continuity options it provides.
European challenge rankings align closely with global results, with the largest discrepancy being visibility of all technology for on-premises, SaaS, cloud (50% Europe vs. 61% global). Reporting on spend by vendor and application saw an uptick in Europe, suggesting challenges in spend allocation as workloads share cloud environments and resources.
Despite having slightly better visibility over technology assets compared to the Americas, European respondents still struggle with comprehensive visibility of hybrid IT estates
The percentage of European respondents experiencing challenges related to spend increased as organizations move more workloads to the cloud.
Similar to global results, Microsoft dominates as the top vendor in Europe (61% compared to 54% globally). SAP, AWS, Google and Oracle round out the top vendors in Europe, compared to AWS, Oracle, SAP and Salesforce globally.
European respondents report fewer employees returning full-time to the office (25% vs. 30% globally) and fewer working entirely remotely (17% vs. 23% globally). However, they have a higher percentage working in a hybrid environment (36% vs. 27% globally), suggesting a more flexible workforce that balances both office and remote settings compared to their global counterparts.
Digital transformation continues to evolve at an ever-increasing pace. Enterprises are adapting to continued inflationary pressures, shifting workplace dynamics, increased spend and the demand for innovation. Economic uncertainty is shifting priorities in digital transformation, with many IT professionals transitioning back to the office. At the same time, vendor prices continue to rise, leaving organizations struggling to optimize spend and cloud commitments, which often require significant initial investments.
While juggling these priorities, enterprises face numerous obstacles: wasteful IT expenditure is on the decline, but decision making is hampered by a lack of clear and trusted IT visibility. A comprehensive grasp of IT assets—including their connections, interdependencies, licensing nuances and optimization opportunities—is indispensable. Leading organizations utilize data to inform crucial decisions, with a focus on spend optimization while fully investing in the potential of artificial intelligence.
Flexera saves customers billions of dollars in wasted technology spend. A pioneer in Hybrid ITAM and FinOps, Flexera provides award-winning, data-oriented SaaS solutions for technology value optimization (TVO), enabling IT, finance, procurement and cloud teams to gain deep insights into cost optimization, compliance and risks for each business service. Flexera One solutions are built on a set of definitive customer, supplier and industry data, powered by Technopedia, that enables organizations to visualize their Enterprise Technology Blueprint™ in hybrid environments—from on-premises to SaaS to containers to cloud.
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