On the bright side, fewer businesses expect supply chain issues to be a problem in 2024 compared to last year (42%). However, more companies are expecting to face challenges due to increases in costs and IT skills shortages in the coming year (46% and 28% in 2023, respectively).

Despite recent cost cutting and ongoing challenges, there is reason to be optimistic. Most companies plan to raise IT budgets, and overall IT spending is expected to grow in 2024.

Two-thirds of businesses (66%) represented in our survey told us they plan to increase year-over-year IT spending while only 4% plan to decrease spending. The remaining 30% will keep their IT budgets level.

Enterprises (1000+ employees) are most likely to increase YoY spending, with 75% of these larger organizations expecting tech budgets to rise.

Overall, corporate IT spending is expected to grow by 6% YoY, with a median increase of 5% at a company level.

What’s driving more companies to increase their investments in IT, even as so many have cut overall costs to prepare for a potential recession? In our view, technology is essential in the modern workplace and a key driver of productivity. Cutting back doesn’t make sense from a business perspective, especially if technology spending has a positive impact on the bottom line.

Our ongoing State of IT research tracks many factors that are expected to influence budget growth. While spending increases in 2024 will be significantly influenced by rising costs, new funds more often will be used to directly address challenges and forge ahead with new initiatives.

The top reasons influencing spending planned growth in 2024 include: Need to update infrastructure, increased priority on IT projects, increased security concerns, inflation, and employee growth.

In the 2024 edition of the State of IT report we updated our tech spending methodology to more accurately reflect how IT budgets are allocated in the real world. Going forward, we will use the more comprehensive Technology Business Management (TBM) framework, which in addition to previously tracked categories (such as hardware, software, cloud, and managed services) now includes additional categories such as IT labor, facilities, telecommunications, and internal services.

As a result, it will be more difficult to track YoY changes this year. However, our new framework comes with the benefit of more granular spending breakdowns, as shown below.

When budgets tighten, non-essential spending is typically cut first. For that reason, one gauge of optimism we watch is plans to invest in emerging technologies — ones that might not be essential to core business functions or have an immediate return on investment. Tracking these tech trends also helps us understand which specific solutions are being implemented within the broader technology spending categories.

Looking forward, adoption plans are strong across all technologies we’re currently tracking. Notably, businesses anticipate that they will double the adoption of the following within the next two years: Kubernetes, edge computing, converged infrastructure, serverless computing, and artificial intelligence (AI).

Additionally, more than half (57%) of businesses plan to adopt AI within the next two years (25% currently, 32% within 2 years).

Given that increased security concerns are among the top reasons influencing IT spending growth, it shouldn’t come as a surprise that companies plan to adopt emerging cybersecurity technologies at a healthy pace in 2024.

Notably, nearly twice as many respondents anticipate adoption of the following within the next two years: User behavior analytics tools, passwordless authentication, IoT security solutions, zero trust security solutions, and security solutions powered by AI.

In this edition of our State of IT study, we set out to identify areas where IT teams are currently doing well and where they could use improvement. Now that the results are in, we know most IT departments believe they’re doing at least a “good” job across the IT metrics we’re tracking, with more than a third of respondents giving themselves “excellent” marks for application uptime, customer satisfaction, and protecting against security threats.

When we dug deeper into the data, we found a more telling way to measure IT teams’ relative performance is by tracking improvements across these same metrics over the last two years. Most companies believe they’ve improved at least slightly across all metrics, but relatively few say they’ve “improved significantly” in any area.

The biggest self-reported improvements in IT performance have come in protecting against security threats — perhaps thanks to budget increases being influenced by increased security concerns, in addition to plans to adopt emerging security technologies. Even so, it’s worth noting that the ultimate measure of success is not the grades we give ourselves, but whether the defenders actually reduced the number of successes by the attackers (i.e., successful data breaches, ransomware attacks, service disruptions, and so on).

The IT metrics where companies tend to rate themselves the lowest (in both current performance and improvement) are related to getting the most for their money: Optimization of IT costs, getting value out of their vendor relationships, and adding measurable value to the business (ROI). These three were also the least commonly tracked IT metrics.

Using the Aberdeen Strategy & Research “Best-in-Class” methodology based on these metrics, we created a proprietary model to rank IT teams based on their reported performance. We then analyzed the behaviors of Best-in-Class companies (those scoring in the top 20%) to see what sets them apart.

Going into 2024, the business world is navigating much uncertainty. The macroeconomic climate is unclear, and many companies are still dealing with pandemic-related challenges including rising product costs, fear of an economic recession, and an IT skills shortage.

While most companies are cutting back on some spending (both IT and non-IT), there’s encouraging news for IT departments and tech vendors alike. Two-thirds of companies plan to increase technology investments in 2024 and we expect overall IT spending to grow 6% YoY. At a company level, the average IT budget is expected to grow by a median of 5%.

These forward-looking stats are useful benchmarks whether you’re an IT professional working to get approval for your IT budget requests, or if you’re a tech vendor making future marketing plans.

Importantly, over the past several years, our research has shown investments in technology have yielded positive results across companies of all sizes. It’s crucial to note that the top performing IT teams are significantly more likely to increase their budgets and invest in emerging technologies that give them a competitive edge.