Dive Brief:
- As CIOs tighten their budgets, technology spending is not expected to slow down “unless there is a catastrophic recession,” IBM CEO Arvind Krishna said in a conversation at the Economic Club of New York last Thursday.
- “As I talk to CEOs and CIOs pretty much across the globe, almost none of them are talking about cutting down technology spending,” he said, assuming a mild or moderate recession could take shape.
- Technology spending is being used to offset inflationary pressures, including capital costs, Krishna said. The worst-case prediction is that GDP growth falls to zero. But even in that scenario, tech spending would grow by 3% year-over-year, he said. “That is a big difference from before, when tech spending and GDP would go together.”
Dive insight:
Krishna’s analysis supports recent industry forecasts that enterprise tech spending will grow despite economic uncertainty.
John-David Lovelock, distinguished VP analyst at Gartner, recently called enterprise IT spending “recession-proof.” Last month, Gartner forecast that enterprise IT spending will reach $4.6 trillion worldwide in 2023, a year-over-year increase of 5.1%.
Krishna said the biggest concern among IBM’s clients is labor demographics, above inflation and interest rates. Clients require employees with specialized skills to help evolve digitization programs currently in progress, he said.
The first wave of digitization was about digitizing legacy processes, but clients now require humans to review operations to facilitate greater speed and efficiency, he added.
The IBM CEO singled out a lack of available workers with cyber skills, an area he said had around 500,000 open jobs in the U.S. and two to three million open jobs globally.
“Where are you going to get these [people]? You can’t grow people like that in a week,” he said. The skills gap was a boon for the company’s consulting business.
Despite labor market pressures, the skills shortage is expected to be a short-term phenomenon, Krishna said. While layoffs are playing out across the tech sector, IBM does not plan to freeze hiring, while “rebalancing in terms of where,” he said.
