IT budgets are up in the air. Here's what businesses are buying in 2021

Dive Brief:

Companies are split on what direction IT spending will take in 2021; 32% of IT departments expect an IT spend decrease during the next year, but 49% expect their budget to increase, according to the Flexera 2021 State of Tech Spend Report's survey of 474 IT executives and high-level managers. The top IT initiatives in 2021 mirror 2020's priorities, with companies prioritizing digital transformation, cybersecurity and cloud.
More than half of respondents to the Flexera survey expect to increase investments in Amazon Web Services, Salesforce, Google or other cloud services this year. But Microsoft remains the top IT vendor for survey respondents, with AWS coming up second.
"Enterprises are under enormous pressure to increase innovation and reduce IT spend," Jim Ryan, president and CEO of Flexera said in an announcement. "In chasing innovation, we continue to see a significant, some would say unsustainable, increase in cloud spending."

Dive Insight:

Cloud giants expanded their stronghold on the SaaS market in 2020 as businesses sought support for the quick shift to remote work. Now, with businesses in recovery mode and still supporting long-term remote work, companies are deepening their reliance on the top SaaS vendors, as smaller competitors get pushed aside.

Pre-pandemic, modernization plans included a migration to the clouds in parts rather than a holistic jump. Cloud became essential amid the quick shift to remote work to maintain business continuity.

While it didn't start the move to the cloud, the "pandemic just accelerated what was already going on as digitalization across the industry in general," Shyamal Patel, senior director of product management at Flexera, told CIO Dive in November.

The top cloud vendors are poised to take advantage of the expanding market. AWS, Microsoft Azure and Google Cloud all grew in spite of — or perhaps because of — the COVID-19 pandemic. Microsoft dominates with 47% of respondents to the Flexera survey listing it as their top vendor by spend and 84% listing it among their top three.

But others fell off. A quarter of respondents to the Flexera survey expect to decrease spend on Oracle and 23% plan to decrease spend on IBM software.

"Ultimately this is really a three-horse race in much of the western world," Raj Bala, senior director analyst at Gartner, told CIO Dive before the pandemic accelerated growth. Those in the lead — AWS, Microsoft and Google — have continued their expansion.