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Part 1: 2H’20 Enterprise Tech Macro Trends + COVID-19 Impact on Tech

-4% Global IT Spend Decline for 2020, With the Preponderance Taking Place in 2H

ETR Research 

| July 24, 2020

Every quarter, ETR releases a short brief discussing near-and long-term IT trends. Over the next three weeks, ETR will be highlighting key trends via our newsletter for 2H'20 and beyond. Here's part 1:

Based on our third COVID-19 Drill Down Study (polling period: 6/16 - 7/6, ~1200 CIOs), the data is pointing towards a decline of -4% in global IT spend for 2020. Our updated estimate roughly matches the forecast we provided back in March, when we conducted our first COVID-19 Drill Down Study.

Please note: [1] ETR is not making a call on a specific quarter - our forecast represents the decisions that have been made to date regarding the direction of 2020 IT budgets; and [2] ETR is using consensus expectations of +4% as its baseline projection (i.e., expected global IT spend growth coming into the year).

[a] With daily COVID-19 cases reaching all-time highs in the US, and the future arguably more uncertain now vs three months ago, it’s notable that our forecast remains roughly unchanged. Though organizations plan on cutting additional expenses due to less anticipated revenue, IT budgets don't appear at further risk. The key word here is ‘further’, as IT budgets have already moved -800bps from the beginning of year, which doesn't bode well for overall tech spend heading into 2H.

[b] Let’s speak to the latter point first, and then we'll address the first part of that statement in part 2 of our takeaways (will be released next Friday). We reported back in March that a large percentage of organizations were ramping up their IT spend to support remote workforces. We also indicated that this IT spend disproportionately favored Cloud & SaaS companies. Based on Q1 earnings, our data proved to be accurate. In our most recent survey, we followed up with these CIOs and asked for more granularity as to the timing of their IT spend. 24% of survey respondents, or 1 out of every 4 CIOs, indicated that they spent more in 1H’20 vs their planned spend for 2H’20. How does this compare to prior years? This time last year and two years ago, 15% and 16% of organizations indicated as such, respectively. An abundance of spend in 1H, which made Q1 appear quite positive, coupled with IT budgets still projected to decline in 2H, means the preponderance of spend declines will occur in the back half.

More to come next week...