Companies are spending to gear up work-from-home infrastructure as a result of the global coronavirus pandemic, but signs currently point to flat or reduced information technology budgets for the remainder of the year.

That’s the good and bad news gathered from survey data provided by Enterprise Technology Research this week. The firm received information during the past several days from over 1,000 chief information officers and IT buyers.

“What we’re seeing right now, based on the data, is that budgets have come down to about zero percent or flat for 2020,” said Sagar Kadakia, director of research at ETR. “If the environment continues to go south, if we continue to see actions taken at the federal and state level where more people are going to quarantined, working from home, I think technology spend will inevitably continue to come down.”

Kadakia spoke with Dave Vellante, chief analyst at SiliconANGLE sister market research firm Wikibon and co-host of SiliconANGLE Media’s video studio theCUBE, in a breaking analysis video. They discussed rapid changes in budgeting decisions as new mandates are issued, a need to avoid productivity collapse, the impact of supply chain disruption from COVID-19 restrictions, cybersecurity as a growth area and what the next few months may bring.

Budget growth from 4% to zero

The impact of COVID-19 on IT budgets has been a fluid process. ETR previously estimated budget growth of 4% in 2020, and then initially reduced that to 2% as the virus began to spread, according to Kadakia.

“By last Thursday and Friday, when everyone was working from home and they put a lot of different mandates in place at the state and federal level, you could see the rate dropping almost daily,” Kadakia said. “Right now, we’re at zero percent and the reason we’re not more negative is because there is some offset occurring from the ramp-up in work-from-home infrastructure.”

Spending for remote work accelerated

The reduction in budget growth has been mitigated in part by the need for most enterprises to develop a remote work system for employees quickly. Earlier this week, ETR compiled its data and noted that 40% had seen no impact on spending, as shown in the chart below. An additional 20% are actually accelerating spending, according to Kadakia.

“The positive spend or the no-change-in-spend is what a lot of the market right now is missing,” Kadakia said. “We’re actually seeing people accelerate spend because of COVID-19 and the reason is they’re trying to avoid a catastrophe in productivity. They are ramping up all of this work from home infrastructure, not just collaboration tools, but virtualization infrastructure, increasing networking bandwidth, mobile devices, laptops, security, desktop support.”

A hit to global productivity may yet be impossible to avoid. Although most large industrial firms in China have reopened factories, the largest U.S. automakers announced a shutdown of plants on Thursday.

“If you’re in manufacturing or you have employees that work on a rig, there’s no work from home option for that,” Kadakia noted. “A lot of the commentary that we got from CIOs was: ‘We’re not ready to scale an entire workforce from home.’ Productivity is going to come down because organizations are just not capable of scaling a work from home infrastructure.”

Supply chain impacts

In addition to productivity challenges, corporate executives are also dealing with broken supply chains. Disruption in the Chinese economy was first, but now supply chain issues have spread globally as well.

“Industrials, materials, manufacturing, retail, consumer, healthcare and pharma — those are the verticals that are indicating elevated levels of broken supply chains,” Kadakia said. “What’s interesting is that in this survey we asked not only what supply chains are broken today, but whether they anticipated continuing to experience broken supply chains three months from now. Those percentages were up.”

If there is a growth industry on the horizon, it could well be the cybersecurity space. The mass movement to remote work has created a much larger attack surface for enterprises and the need for critical government employees to transact agency business from home led the White House to earmark tens of millions of dollars for cybersecurity defense on Tuesday.

“All of these employees are accessing data, emails, applications from home,” Kadakia said. “Organizations are more exposed, and a lot of organizations are worried about employees working from home just from a security perspective. You are going to see more spend in those areas.”

ETR plans to continue releasing new survey data as the impact of the coronavirus pandemic plays out across the enterprise IT landscape. The research firm will be publishing trend narratives for specific vendors in the next few days and plans to release its major survey on IT spending around mid-April, according to Kadakia.

Although the most recent survey data shows a mix of news for the IT ecosystem, future results will likely be worse before they get better.

“We do know, for the next three months, things are going to continue worsening,” Kadakia said. “More organizations indicated more broken supply chains, less demand on the consumer or business side. The longer we are quarantined, the less meetings, the less that we’re getting on flights, the more that’s going to add to technology spend coming down.”

Here’s the full video interview with Kadakia:

Image: Pixabay