In a report titled “Global Tech Spending On The Rise,” Deloitte Private’s “2023 Mid-market Technology Trends Report” reveals an unprecedented surge in technology investments.
The surge marks the highest level of tech spending since the beginning of the pandemic, with a remarkable 53% of respondents reporting that their organizations are allocating over 5% of their annual revenue towards technology representing a significant increase from the 2019 peak of 43%.
In turn, this signals a noteworthy recovery from the modest 20% observed during the challenging year of 2021, which was marked by the global pandemic.
Addtionally, the latest forecast by Gartner predicts that worldwide IT spending will reach a staggering $4.7 trillion in 2023, reflecting an impressive 4.3% increase from the previous year. This data underscores a growing emphasis on technology investments in the business world, indicating a robust and dynamic technology landscape.
Deloitte’s Mid-Market Technology Trends Report
Deloitte Private’s “2023 Mid-market Technology Trends Report” has provided essential insights into the current state of technology investments within the private and mid-market company segment.
The survey, administered online by an independent research firm from May 4 to May 24, 2023, reached executives, with 50% holding C-suite positions and the remaining half representing non-C-suite decision-makers. These leaders hail from companies in the United States with annual revenues spanning from $250 million to over $1 billion.
Intriguingly, 80% of the survey’s participants were associated with privately held companies, while the remaining 20% were from publicly-traded firms, painting a comprehensive picture of the tech spending trends across various business structures and sectors.
Remarkable Resilience and Recovery
One of the most compelling findings of the report is the remarkable resilience and recovery of tech spending in the mid-market.
Over 53% of the surveyed respondents revealed that their organizations are investing more than 5% of their annual revenue in technology. This marks a substantial increase from the 2019 peak of 43%, clearly indicating a renewed focus on technological advancement. It’s a striking comeback from the low point of 20% observed during the tumultuous year of 2021, which was marred by the global pandemic’s disruptions.
It’s noteworthy that Deloitte Private has been conducting this survey since 2013, consistently gathering insights from executives of mid-sized private companies with annual revenues ranging from $250 million to over $1 billion.
Worldwide IT Spending – A Glimpse into the Tech Sector’s Future
The latest projection by Gartner, Inc., foresees worldwide IT spending reaching $4.7 trillion in 2023, signifying a substantial 4.3% increase from the previous year. This data unveils a clear trend of investing in technology as a strategic imperative for businesses globally.
The changing landscape of IT investments is attributed to businesses recognizing the critical importance of technology for their growth and sustainability.
CIOs, in particular, are facing increased competition in attracting IT talent, compelling them to reallocate resources towards technologies that enhance automation and efficiency. This shift is aimed at driving growth at scale with fewer employees, emphasizing the evolving role of technology in business strategy.
John-David Lovelock, a Distinguished VP Analyst at Gartner, noted that “digital business transformations are beginning to morph.”
“IT projects are shifting from a focus on external-facing deliverables, such as revenue and customer experience, to more inward-facing efforts focused on optimisation,”
“This shift reflects the evolving priorities of businesses in a rapidly changing technological landscape,” says Lovelock
Looking ahead, the forecast for 2024 is equally promising, with global IT expenditures expected to reach $5.1 trillion, marking an 8% increase compared to 2023. While generative artificial intelligence (GenAI) has not yet significantly affected IT spending, broader investments in the field of AI contribute to the overall growth.
Tech Priorities in the Mid-Market
In the ever-evolving world of technology, mid-sized companies are proving to be agile and forward-thinking, consistently investing in cutting-edge innovations.
In the current landscape, artificial intelligence (AI) stands out as the top tech investment priority for these enterprises. A substantial 40% of respondents declared AI as their foremost tech investment focus, reflecting a remarkable increase in interest.
To put this in perspective, just a year earlier, in 2021, only 12% of respondents anticipated that AI would have a significant impact on their business within a year. This rapid surge in interest underscores the growing influence of AI as a transformative force in the business world.
AI’s impact on revenue growth is equally striking. Respondents with active AI solutions reported a remarkable 47% experiencing revenue growth of 20% or more. This starkly contrasts with businesses that have not yet embraced AI, with only 23% of them reporting such impressive financial growth. This data reinforces the notion that AI adoption is not just a passing trend but a bona fide catalyst for success.
Emphasis on Data Security
Data security has also risen to the forefront of tech priorities for mid-market companies. A significant 74% of respondents expressed high or very high confidence in their business’s cybersecurity capabilities, indicating that leaders are seeing positive results from their investments in safeguarding their data.
Notably, businesses with active AI solutions displayed significantly higher confidence levels in their cybersecurity capabilities.
They were more than two-and-a-half times as likely to have very high confidence compared to businesses that have yet to explore AI (32% vs. 11%) highlighting the symbiotic relationship between AI and data security, where one complements the other to create a fortified technological infrastructure.
Adaptation in a Converging Landscape
In the era of technological convergence, industry boundaries are blurring, and mid-market companies are keeping a watchful eye on competitive threats emerging from sectors beyond their own. More than half of these enterprises (51%) acknowledge the presence of such threats but also seem prepared to pivot and expand into adjacent industries.
A survey also revealed that a substantial 70% of respondents have developed assets with the potential for monetization outside their core sector. The number rises even higher to 81% among organizations reporting the highest return on investment from their tech initiatives.
The adaptability and willingness to embrace cross-industry opportunities highlight the agility and resilience of mid-market players in 2023.
Talent Retention Challenges
Retaining tech talent remains a crucial concern for these companies, given the ever-increasing demand for skilled professionals. Multiple strategies are being employed to keep tech professionals within their ranks.
Competitive benefits and compensation packages (36%) are considered the most effective, along with offering flexible work environments and geographic options (36%).
The strategies are closely followed by creating flexible career paths, fostering transparency, providing improved performance feedback (34%), and investing in diversity, equity, and inclusion programs (34%).
However, despite efforts, the demand for AI-related skill sets is intensifying, leading to fierce competition for talent.
Respondents noted that their businesses are facing difficulties in attracting AI strategists (40%), engineering talent (37%), and data and deep-learning scientists (35%), underscoring the ongoing need for a robust talent pipeline to support the ever-expanding AI landscape.