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How Companies Are Hiking Tech Spending Amid Mass Layoffs

Surprisingly, tech spending worldwide is on the rise despite mass layoffs. In India, there have been over 35,000 layoffs in 2022 alone. However, companies which are facing the brunt of the recessionary environment are still hiking their tech spending. The gloomy global atmosphere has not deterred them from investing in technology expansions.

In recent times, stocks like Amazon.com and Microsoft got battered after a growth forecast for their cloud computing businesses, and they are also among the tech behemoths executing mass layoffs and hiring freezes. While 2023 remains an enigma to analysts, tech spending has shown few signs of stopping.

But the latest report on the third-quarter gross domestic product had an investment in equipment and intellectual property rising–including tech hardware and software.

Expert Speak

Experts predict that tech demand will keep growing and companies across the economy. They will keep spending on emerging technologies that change how we work and play.

“CEOs and CFOs have no intention of cutting tech spending,” said Gartner Chief Forecaster John-David Lovelock. “Chief information officers are still wearing their halo from 2020, and CEOs are going back to the people who gave them the last set of solutions″, he added.

On the livelier side, the GDP report painted a picture of relatively strong technology demand, said Bank of America Merrill Lynch economist Michael Gapen. “

“The surprise was that equipment spending was stronger than expected,” Gap pointed out. “Investment in that category is going to be persistent. If we have a risk, it’s that this grows at a slower rate,” he observed.

Demand has stayed strong for both hardware and software. For intellectual property, investment fell 3.6% in 2009 but has risen an average of 10% annually in 2021 and 2022, Gapen noted.

There Is A Vision of Sustained Growth

Tech spending overall will rise about 5.1% next year after a gain of less than 1 percent this year, according to a new survey by Gartner. This is nearly unchanged from surveys earlier this year and reflects executives’ knowledge that companies that cut investment during the 2008 financial crisis badly lagged competitors in years that followed, Lovelock said to CNBC.

“Data has come in right around our forecast, except for consumer devices, which have been a little lower,” Lovelock averred. Both semiconductors and consumer devices are working in a situation where the heavy demand can’t be sustained in 2020.

“Workers bolstered their home offices, resulting in households having relatively new gear on hand with few compelling new applications to spur upgrades,” Lovelock said to CNBC.

In recent years, growth in cloud computing, the highest-profile category of technology investment, has slowed only minimally and was destined to come down from its initial hyper-growth stage, Lovelock noted.

Gartner expects cloud computing revenues to rise to $101 billion next year — over $90 billion in 2021 but representing a smaller growth percentage. In percentage terms, cloud spending will rise by about 20 percent for the next two to three years, according to Gartner’s forecast.