Today we report the results from the second annual Flexera 2021 State of Tech Spend Survey to identify the latest IT spending benchmarks and trends. This report is based on responses from more than 474 enterprise CIOs and IT executives who are driving digital transformation. The report enables enterprises across every industry to analyze technology spend trends and benchmark against peer organizations.

There are many key highlights especially relevant to organizations dealing with fast-paced hybrid IT environments. The 2021 Flexera State of Tech Spend Report uncovered what’s trending in large and medium enterprises, highlighting the noteworthy and sometimes dramatic shifts since last year’s report was published. The COVID-19 pandemic has proven to be a game changer. It has forced organizations to accelerate digital transformation efforts to support major changes in how and where people work and to mitigate negative impacts of the economic downturn. Nearly half of IT staff members now work from home. Time frames for returning to the office are uncertain. And 20 percent of those now working from home will do so permanently after the pandemic ends.

Challenges in managing IT spend

We asked survey participants what challenges they face managing IT spend. The four most significant challenges reported by respondents: too many manual processes, understanding the cost of delivered IT services, difficulty getting data to optimize spend and ensuring spend efficiency (avoiding waste).

IT Spending Challenges

Impact of Covid-19 pandemic on digital transformation

The typical hybrid IT environment consists of both legacy systems and new technologies, which has led to an IT tangle that challenges IT teams with running the business while moving forward with new initiatives. The top three IT initiatives for organizations today are digital transformation, cybersecurity and cloud/cloud migration—because they’re all closely aligned. In comparing the year-over-year percentage changes for organizations’ priorities, digital transformation and cybersecurity remain at the top of the lists while cloud/cloud migration has risen somewhat. The most notable jump is cost savings, which tripled over 2020, with 27 percent of this year’s respondents citing it as a top initiative compared with nine percent last year, most likely related to the COVID-19 pandemic and recession.

2021 report: IT Spending Initiatives

Spend optimization frees up investments for digital transformation and cost savings

To achieve cost savings while still striving to achieve positive outcomes from digital transformation efforts, organizations will need to free up investments by reducing waste. Survey data indicated organizations are not mature in optimizing spend—especially in the cloud and SaaS. And there is significant room for improvement when it comes to identifying shadow IT and wasted IT spend as well as optimizing public cloud and SaaS spend.

IT Spending Benchmarks

Spend optimization is especially critical for cloud

The shift to cloud continues, with cloud spend (SaaS, PaaS and IaaS) now representing 30 percent of IT spend, surpassing on-premises software spend (24 percent).

 IT Spend Benchmarks

COVID-19 has driven cloud spend up and on-premises software spend down. This isn’t surprising as organizations turn to SaaS and move more apps and data to the cloud to support employees working from home. Organizations are also transitioning more activities to the cloud as business shifts online. This is especially true in the retail sector. The figure below shows these trends. It also shows spending on personal computers, networks and other devices rising to support at-home workforces.

IT Spending Trends in 2021

2021 Changes in IT Spend

With this increase in cloud and SaaS spend, it’s important to put in place tools and processes that can assist with identifying shadow SaaS spend and rationalizing the portfolio to prevent or reduce overlapping and underutilized applications, or those that could create a security risk.

Only 20 percent of organizations reported they were very mature when it came to identifying shadow IT. With 26 percent of business units having control of decentralized IT spend, it’s easy to understand why complete visibility into shadow IT purchases can be complicated.

Rightsizing cloud environments will be an ongoing effort to reduce or avoid waste. Data in this area indicated there was much opportunity for improvement because only 20 percent of companies reported they were very mature when it comes to identifying wasted IT spend.

As the cloud grows, on-premises remains important

The survey asked respondents about their current and future use of leading technology vendors across traditional on-premises software, SaaS and public cloud. Microsoft, with products that touch virtually every part of the IT stack, continues to make gains and hold the largest share of any of the vendors. Forty-seven percent of respondents report Microsoft is their top vendor by spend. And another 23 percent say it’s their second largest. The organization has managed to maintain a successful on-premises business while also excelling in the cloud space.

Twenty-two percent of respondents place AWS in the number one spot in terms of spend; twelve percent rank it in the number two spot. AWS now holds the second largest share of the top vendors. This bears out what respondents indicated in last year’s survey—that Microsoft and AWS were expected to be the top two vendors in terms of IT spend. Notably, AWS has enjoyed significant gains since 2020 when 19 percent of respondents named it as the first or second largest vendor. At 34 percent this year, AWS pulled ahead of SAP and holds a clear lead over Oracle and Salesforce.

Top Technology Vendors

Flexera drives spend optimization for digital transformation

Flexera enables visibility into the data needed for the digital transformation journey, from understanding current on-premises costs and software license entitlement positions to handling cost-to-cloud and ongoing optimization of IaaS, PaaS and SaaS services. Flexera helps customers optimize both on-premises and cloud spend as they navigate the shifting technology landscape, regardless of the vendors they choose. Get the full survey results in the Flexera 2021 State of Tech Spend Report or reach out to a Flexera expert to learn more about this data and how we can support your efforts.