10 Ways Inflation Will Impact IT

Hardware, services, talent acquisition, IT teams all over the country are feeling the inevitable squeeze of inflation. It can be frustrating for CIOs on a number of levels. The global forces that shape the bottom line are complex and rarely easy to predict, and the moving targets can make budgeting feel like a futile task. The best you can do is recognize what’s likely to change and then prepare accordingly. We’ll look at what IT spending trends say about the economy and about how you can feel confident no matter how the market is performing.

1. Regulations 

When the economy changes, so too do the regulations. Governments are attempting to stave off everything from preemptive panic to total economic collapse. CIOs have to be aware of not only how it will impact the IT department, but what it will mean for the entire C-suite. As a CEO puzzles through their next moves, they need their IT team to be ready to protect the company. Whether the goal is to maintain or grow the organization, you’ll need to be a little more calculated about every new initiative, expense, or hire. 

2. Rising Wages – Nationally

The more prices go up, the more skilled workers demand in terms of compensation. By April of 2022, there were 1.6 million job postings for tech positions in the US. With an unemployment rate of 1.3% in the tech industry, the competition for talent is steep. If you want to retain the best of the best, you might have to meet bolder demands than you’re used to. (While it’s true that employees can be swayed by other factors, like flexible schedules, their paycheck is still usually the primary consideration.)

3. Rising Wages – Internationally

Rising salaries aren’t just happening in America either. Offshoring is becoming less viable as wages increase all over the world. 

4. Penny Pinching 

How and where to spend money is an endless debate, both in our professional and personal circles. As a rule, inflation tends to make people more disciplined about the matter. However, this equation is presenting something of a conundrum in the cloud era: if you’re already relying on usage-based models and subscription services, it might not seem like there’s any room to cut costs. The good news is that experts find there are always ways for a team to run more efficiently, even if it means monitoring the data like a hawk. 

5. Supply Chain Issues 

You’ve likely already felt the sting of the supply chain by now, but rising inflation will make it even worse. Standard equipment, like workstations and servers, is taking longer and longer to deliver. 

6. Higher Bills Due to Backlog

Looking ahead to 2023, the backlog is likely to push prices up. For anyone who needs equipment immediately, like a laptop for a new hire, they can expect to pay premium prices for the privilege. Supply chain snags are also forcing many IT leaders to rethink how they negotiate, who they work with, and whether it makes sense to consolidate vendors. 

7. Plans for Innovation and Resiliency

Automation, AI, analytics: the push is for IT leaders to quantify exactly what they’re bringing to the company. So while there will be some people who slash costs wherever possible, inflation is also likely to boost the number of tech investments. Fighting inflation means improving customer engagement and reducing risk, and automation technology spending has the ability to both cut down on rote tasks for employees and improve the customer experience. All the latest tools come with the additional benefit of lowering overall costs for the organization. 

8. Higher Ransom Demands 

Hackers may not follow the rules of polite society, but they do still need to buy things. The more inflation hits them, the more likely they are to lash out at their victims. It’s an interesting flip to think about how the economy affects the black market before tracing it back to you, but it’s important to be aware of the ripple effects. If you’re not investing in upgraded and updated security, it can end up costing a lot more than you think. 

9. Tighter Coordination

Demand management is a planning methodology. Companies use it to forecast and plan how to meet demand for services and products. And with inflation and supply chain disruptions hitting businesses across the world, CIOs and their C-suite colleagues are beginning to re-evaluate initiatives to ensure they still make sense and whether they’re still appropriately prioritized.

10. More Economic Talk

Most executives have no experience navigating economic conditions such as these. Therefore CIOs have to get educated on the subject, and fast. Along with the rest of the C-suite, CIOs must understand how government and regulatory actions could impact the economy and ultimately their own organizations, and how they should best respond. This means more conversations about the economy for all.

Key Takeways 

CIO spending is becoming more curtailed in certain respects and more bloated in others. Money might be allocated more towards salary than equipment, and vendors might be cut in an effort to save some money. 

All of these measures, whether they’re proactive and reactive, serve to give organizations a fighting chance in a changing economy. The most important thing for any CIO to realize is that their moves are likely to be more scrutinized. For every major cost or decision, they may get more questions or pushback than before. The more a CIO can answer potential objections, whether they’re about regulations on the horizon or additional security measures, the more likely they’ll be able to keep their agenda on track.