IT firms’ budget for cloud to grow further

But Bain & Co. says maintenance spending to ease

SPENDING of technology companies on cloud computing will continue to grow over the next year and beyond, global management consulting firm Bain & Co. said.

Technology firms paused many of their IT-related investment plans at the onset of the coronavirus crisis, the firm said in its latest report.

“Early in the pandemic, IT decision makers said they expected decreased spending on software maintenance contracts and on-premise IT to continue at least through 2021. The expected spending reductions have only grown more pronounced as the pandemic has unfolded,” it added.

However, companies’ IT decision makers immediately increased spending on cloud-based security and software-as-a-service for remote work, the consulting firm said, noting that cloud budgets are also expected to continue growing “over the next year and beyond.”

Technology firms have been reshaping their businesses in response to the pandemic crisis. Employees work from home, companies aim to reduce costs, artificial intelligence and analytics guide most of their decisions, and the use of virtual sales has accelerated.

The consulting firm noted that technology companies are actually “12% more likely to be disrupted” than those in the retail rector.

Technology firms are also 25% more likely to be disrupted than those in financial services.

The US-based company said further that only advanced manufacturing and services firms have a “higher likelihood of being disrupted than technology companies.”

It warned technology companies that once they fall behind, it “can be difficult to repair.”

“A technology company that has been disrupted is 12% less likely to return to sector-average revenue growth or higher than companies in retail and 17% less likely than those in healthcare,” Bain and Co. noted.

Hence, industry players should innovate if they want to survive, it said.

“Tech is not an industry where there are many second chances,” David Crawford, global head of technology practice at Bain & Co. and a lead author of the report, said in an e-mailed statement on Tuesday.

“The longer a technology company lags its sector, the less likely it is to recover. This makes it all the more important for tech companies to understand what will make their business different in just a few years,” he explained. — Arjay L. Balinbin