9 trends that are keeping IT spending at record highs, according to top IT execs - and it's good news for Amazon and Microsoft
US IT budgets are growing faster in 2018
CIOs indicated "modest acceleration" in terms of their IT budget growth, according to the report. The survey found that budgets will grow around 5.3% in 2018, compared to 5.2% growth in 2017.
When looked at regionally, growth in the US could actually reach 5.5% in 2018, up from 5.3%, while in Europe budgets are expected to grow by 4.6%, which is flat from 2017.
...but CIOs were more optimistic about growth last quarter.
CIOs in both the US and Europe were more optimistic in the first quarter of the year compared with this last quarter, according to the survey.
Estimated budgets for 2018 were 0.1% lower in the Q2 survey than they had been in the Q1 survey. In the US, estimates declined from 5.6% to 5.5% growth, while in the EU they declined from 4.7% growth to 4.6%.
Software is king — and services are on the decline.
CIOs expect software spend to be their biggest area of growth in 2018, with spending increasing by 5.5%, compared to just 5.3% in 2017.
That's at the expense of services, however, which CIOs expect to decelerate to 3.3%, in 2018, from 3.9% in 2017.
Growth in hardware and communication spending is expected to stay the same, according to the report.
More CIOs expect their budgets to grow than in recent quarters.
Across the board, more CIOs expect to see their IT budgets go up.
Of those surveyed, CIOs are 2.7 times more likely to expect their budgets to grow than to shrink — the highest number Morgan Stanley has seen in recent quarters.
Cloud computing is a huge spending area
CIOs' top spending projects in the second quarter are cloud computing and digital transformation, which is unchanged from the first quarter.
Enterprise Resource Planning (ERP) applications is the third most important spending area, replacing security software, which had been third in the first quarter.
Interestingly, Morgan Stanley found that while cloud computing is a big spend for CIOs, it has lost its top spot when it comes to the "most defensible areas of IT spending."
And cloud adoption could hit 48% by 2021.
More and more company work loads are moving to the cloud, according to the survey. Around 28% of all application workloads will be on the public cloud by the end of 2018. And by the end of 2021, that number is expected to hit 48%.
But those cloud computing projects will be cut first in a downturn.
If budgets get slashed, CIOs said the first project to go would be desktop virtualization. Last quarter, the most likely project to get cut would have been consulting/outsourcing.
Though cloud computing is the top priority for CIOs, the survey found that it had the largest increase in "expected cuts" if things were to go downhill, economically speaking.
Amazon and Microsoft have the most to gain from these expanded IT budgets.
Two clear winners of the CIO survey are Amazon and Microsoft, who Morgan Stanley found to be best positioned to get a cut of IT budgets in 2018 and for the next three years.
Dell and Oracle, on the contrary, are the most likely to lose their cut of IT budgets in the same timeframe.
Customer service is a huge area of focus investment for CIOs.
When it comes to digital transformation initiatives, CIOs are most concerned with customer service, IT operations and marketing investments, according to the survey.
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