IT budgets suffer from rising energy costs and inflation

New independent research from Node4, the cloud-led digital transformation Managed Services Provider (MSP), reveals that over half the UK’s mid-market businesses are starting 2023 with pressure on already stretched IT budgets due to rising energy costs, fuel price increases and across-the-board inflation. That’s just one of the key findings from the company’s Mid-Market IT Priorities Report 2022/2023, which was officially launched earlier today. 

This year’s edition of the report — which features multi-year benchmarked data analysis on IT budgets and investment drivers — also uncovers that around nine out of ten IT decision-makers expect the increased costs of doing business to have an even greater impact on their budgets over the next 12 months. This is particularly concerning as the research found that around a third of UK businesses think their current IT budgets are insufficient. Furthermore, close to one in ten don’t expect to see a funding increase during 2023. 

The report’s findings also suggest that, despite the many benefits of public and private cloud adoption, inflationary pressures have led to a re-examination of these models and a desire to access more predictable, stable costs — as well as a wider choice of pricing models. This could explain why, year-on-year, 11% more IT decision-makers have adopted a hybrid cloud model — underpinning its credentials as a viable long-term and potentially more flexible option that combines the best aspects of public and private cloud. 

Looking at the four market sectors covered in the report — healthcare, transport & logistics, insurance, and online retail — healthcare has seen the biggest comparative uptake in hybrid cloud over the last 12 months, with 19% more companies having adopted the strategy. In addition, online retail companies are most likely to reduce their public cloud investment during 2023.  

Commenting on the findings, Paul Bryce, Managing Director at Node4, says: “Investment in public, private and hybrid cloud — as well as managed and colocation services — was central to facilitating the pivot to remote working during the pandemic. And those companies that were further along their cloud transformation journey when COVID hit, coped better. The same is true this year; those with more mature cloud transformation strategies, such as those that have led the way with hybrid cloud consumption models, may be better placed to cope with the uncertainties surrounding the rising costs of fuel, energy, goods and services.”

The research also suggests that over the last 12 months, mid-market companies have reprioritised a range of other IT investment plans to deal with challenges posed by the rising cost of doing business and adjusting to long-term hybrid working. For example, last year, respondents said delivering access to additional tools and services was their top driver for IT infrastructure investment, but this year, productivity and security are in joint first place. 

While IT security concerns also dominated last year’s report, it’s clear that mid-market companies are acutely aware that a hybrid workforce will present an even bigger security challenge this year. As such, any vulnerabilities resulting from the speed at which remote working was introduced during the pandemic must now be addressed as a key priority. 

“Since publishing our Mid-Market IT Priorities 2021/2022 Report last year, the impact of COVID continues to diminish for most businesses,” explains Paul Bryce. “Where last year, it was a case of getting remote working up and running quickly — and, in some instances, at almost any cost — the current economic climate has brought value for money, productivity and a push for rapid growth into sharp focus — all without compromising IT security or compliance directives.” 

He concludes: “A lot of mid-market businesses will be trying to drive productivity improvements through the additional tools and services they delivered to enable homeworking during the pandemic. This will go some way to ensure that hybrid working doesn’t hamper long-term growth targets or shorter-term productivity — which, given the financial pressures faced by businesses right now, has never been more important.”