Whether you’re hoping to stick with your current ERP solution or you’re looking for a new system, one of the most important decisions you can make is whether to go with a cloud solution or an on premise system. To help make that decision, it might be interesting to look at industry trends in spending and examine the reasons for the shifts in spending priorities.
Analyzing IT Spend for 2022
According to a recent research report published by Spiceworks Ziff Davis, most (53%) businesses expect their IT budgets to grow during 2022, and 72% of manufacturing and retail companies expect their revenue to increase during the year. Interestingly, depending on size, 63 to 65% of enterprises with 500 or more employees expect to raise their IT budgets, while only 45% of smaller companies have similar plans. Here’s a look at how they plan to allocate that budget.
Priority of IT Projects
According to the recent report, one of the top drivers of IT investment in 2022 will be an increased priority of IT projects (49%) and the need to upgrade IT infrastructure (47%). The third largest driver that companies cited was increased security concern (44%).
Among companies with more than 500 employees, IT project priorities and security concerns remained as the top two concerns, but upgrading outdated infrastructure became less of a priority. However, among companies with 100 and 499 employees, 58% said they needed to upgrade their IT infrastructure. This implies that the largest companies that responded to the survey have taken the opportunity over the last few years to upgrade IT infrastructure, leaving their smaller competitors behind.
Hardware
Companies continue to spend approximately 30 to 44% of their IT budget on upgrading and maintaining hardware. Interestingly, companies with more than 500 employees are expecting to spend only 27% of their budget on hardware, suggesting they have turned to the cloud in greater numbers. Companies with 100 and 499 employees will spend the most on hardware at 33% of their budgets.
Notably, the smallest responding companies plan to spend 21% of their budgets on laptops and 19% on desktops, implying they have a larger percentage of employees with fixed locations. The larger companies plan to spend 12% on desktops, while allocating larger shares of the budget to mobile devices, network and security upgrades.
Cloud and Managed Services
In 2022, 21% of the IT budgets for the larger respondents will go toward managed services while only 14% of the smaller companies’ budgets will be spent there.
Operating Systems and Virtualization Software
According to the report, the share of budget allocated to virtualization and operating systems has fallen since 2020, but as with other aspects of spend, the shift varies by company size.
Among companies with 500 or more employees, operating system spend is about 11% of the budget, while it makes up 13% of the budget for the smallest respondents. Virtualization software also varies by company size, with the largest respondents putting 8% toward virtualization and the smaller companies needing 10%.
This difference implies that larger companies are moving to cloud-based systems more quickly than the smaller companies. While the difference in overall percentage points for these types of infrastructure spend seems small, the actual spend is much greater given the relative size of the IT budgets. And for the smaller companies, it leaves them falling further behind in their ability to upgrade and modernize their business systems by moving to the cloud.
Managed Services and Cloud-based Services
Larger respondents plan to spend a larger share of their budget on areas associated with cloud adoption. For example:
- Infrastructure as a service 7% vs 6% for smaller companies
- Security 7% vs 5-6%
- IT management 6% vs 5%
Again, while the percentage difference is small, the actual spend is much larger. But, the biggest insight is that larger companies are adopting cloud and managed service solutions faster than smaller companies, leaving small and mid-sized organizations at a major disadvantage when it comes to agility and adaptability.
Adopting ERP in the Cloud
As the share of IT budgets shifts to adopting enterprise solutions in the cloud, companies will increasingly rely on the ability to adapt to business and supply chain changes quickly. Those companies that rely on legacy-type ERP solutions will quickly find staying agile will become more difficult and more expensive.
It makes sense for companies of all sizes to move to ERP in the cloud because of the ability to immediately free up IT budgets for key projects rather than replacing or maintaining legacy hardware and software. And adaptive ERP solutions, such as QAD Adaptive ERP in the cloud, have built-in capabilities on an advanced platform to evolve as a business evolves and changes.
Learn more about the advantages of an adaptive ERP solution in the cloud.
