Charting New Horizons: Navigating Economic Shifts With Evolving IT Budgets and Marketing With a Full-Funnel Strategy

Included Research:

Executive summary

The Annual CIO Surveys from 2023 and 2024 reveal a shift from stagnant IT budgets to stabilizing ones, with @78% reporting growth, highlighting marketing’s evolving role as a key growth driver and a strategic partner to combat business disruption.

Introduction

Technology leaders have navigated a complex maze of challenges in the past few years, ranging from global unrest and supply chain hiccups to skyrocketing inflation. However, the future looks brighter. Supply chain bottlenecks are loosening, inflation is trending back toward target levels, and the IMF forecasts a more stable economic trajectory. The Annual CIO Survey Report 2024 shows a shift to the positive, where CIO budget priorities have evolved.

Unlike the previous year, budgets are now stabilizing, with over 78% of respondents reporting growth compared to last year's analysis, which focused on the impact of IT budgets on software marketing activities and spending. This shift underscores the need for a refined approach in marketing, positioning it as an essential driver of growth in the face of changing financial landscapes.

In this analysis, AI is hot on the heels of transformative technologies like cybersecurity, cloud computing, and data management solutions. The planned investment in AI among those not already invested indicates it has more momentum than any other transformative technologies for 2024. Our emerging technologies quadrant considers existing investment and intended investment for the year ahead as growth indicators and investment planned for further into the future or no investment at all as stagnation.

• AI or ML – 32%
• Robotic process automation (RPA) or intelligent process automation (IPA) – 22%
• No-code/low-code platforms – 20%
• Internet of Things (IoT) – 14%
• Data management solutions – 14%

Numerous IT spending forecasts indicate that due to change fatigue, a portion of this year's IT expenditures are being pushed to 2024, with the possibility of this trend continuing into 2025. Nonetheless, these reports predict a significant double-digit increase in software and IT services spending, primarily driven by the more than 20% rise in cloud spending. Research firms attribute this growth to increased prices from cloud vendors and greater utilization.

Disruptions in the CIO’s business

In reviewing the factors disrupting the CIOs’ business, many disruptions were outside IT’s control, such as government policy and regulatory changes, competitors, and customers. Marketing is crucial because it is the only department to research, plan, and react to these disruptions.

C-level executives face significant challenges in implementing new budget priorities, primarily in hiring skilled staff, integrating new technologies into existing systems, and understanding the total implementation costs. Concerns about the economy’s impact on their enterprises and the long hiring processes raise doubts about maintaining budgets throughout 2024. Implementing new technologies, especially the shift toward AI-driven omni-commerce, requires operational adjustments and strong support from managers. This transition is crucial for CIOs and CXOs, who must avoid missteps in this evolving business landscape.

The software market is constantly evolving, and budgets are an essential part of that evolution. Software buyer budgets are shifting toward more strategic technological investments, focusing on driving digital transformation and improving business operations. Simultaneously, rising software supplier and provider costs make cost optimization essential in shaping software purchase decisions. Your customers seek ways to manage their budgets more effectively while investing in software that delivers real business value.

Critical activities software marketing needs to act on to compete successfully in 2024

1. View the markets through a growth-focused lens, transforming marketing from a perceived cost center to a powerful revenue driver

In marketing, progressive CMOs adopt a growth-focused approach, viewing marketing as a key revenue driver rather than a cost center. This perspective involves a rigorous approach to budgeting, ensuring maximum impact per dollar spent. High-performing marketing organizations navigate budget constraints by exploring innovative strategies like full-funnel marketing, often achieving significant market growth.

As defined by McKinsey, full-funnel marketing combines traditional brand-building with data-driven performance marketing. This approach addresses the divide between brand building and performance marketing, which focuses on immediate sales conversion. Full-funnel marketing integrates these aspects, aiming for immediate conversions and long-term brand growth.

It underscores the need for diversified marketing investments across different channels, recognizing their unique contributions to overall business goals. But it must be measured by key metrics and benchmarks that will help your company scale and guide decisions on making operational improvements. Please review this blueprint, Optimize the Right Metrics to Scale Your Business, for more information.

2. Optimize your pricing as changes in cloud supplier costs are affecting software provider and customer margins

With the tremendous rise in cloud costs and wage inflation over the past 24 months, many major cloud vendors and partners have raised their rates. Suppose software solution providers don’t pass the costs to their IT buyers or customers. In that case, it’s a direct hit to the EBITDA margin, and ultimately, to the overall value of the provider’s business.

The cloud model (SaaS, PaaS, and IaaS) helps vendors respond to inflation because, unlike older revenue models (perpetual licensing), customers can't use the product without paying for it. As a vendor, if you could raise prices contractually, that's a good start, but it’s more complicated. The software market and customers are wrestling with what kinds of price elasticities to expect in the net impact of raising prices and which models to use. Be willing and able to make price, contract, or packaging adjustments, as needed, based on a competitor or buyer’s feedback. For specific guidance, refer to our Optimize Software Pricing in a Volatile Competitive Market blueprint.

3. Ensure your PR team keeps your company’s messaging resonating powerfully

Leverage your experts through thought leadership activities (blogs, research briefs, presentations, webinars, etc.). Use more social media for messaging about software enhancements, expansions into new geographies and market segments, upcoming events, etc. You must have a consistent, planned approach, measuring your voice share by reviewing our note Selecting the Right Share of Voice Platform to Manage and Monitor Your Influence.

4. Reassess and reprioritize your channel sales

Prioritize your company’s use of channel partners with an additional eye on stability and viability and the right fit for your company’s changing requirements. Assess channel partner needs and select partners with complementary capabilities. Establishing a close relationship with the right channel partner for new product sales and needed technologies and business processes can also drive scale. Partner stability, however, becomes of greater importance within an environment of economic uncertainty, and selecting a poor channel partner can spell disaster. Review the Choose the Right Channel Sales Partner blueprint to assess the viability of your vendors as potential partners.

5. Improve sales with CI research for battlecards

Deliver CI-influenced sales wins by arming sellers with up-to-date battlecards, product alignment, and a budget that supports success. A sales-focused competitive intelligence program is most effective when enabling sellers to improve their win rates against key competitors, stay abreast of changes in the competitive landscape, and be measured by CI-influenced wins. Refer to our Build Competitive Intelligence to Improve Sales Win Rates blueprint for specific guidance.

6. Learn to use AI in your product and marketing roles

With business drivers enhancing revenue, trimming costs, spurring innovation, and diminishing risks, product marketing managers (PMMs) have an excellent opportunity to steer their organizations into a new era. To enhance product management, it is advisable for product managers to leverage the capabilities of AI. AI can be used for predictive analysis, allowing managers to forecast user behavior and sales trends, which has been linked to significant profit improvements. Additionally, AI algorithms can aid in optimizing product roadmaps, aligning with market trends. Finally, AI tools facilitate faster decision-making by rapidly analyzing large data sets for market fit, which significantly accelerates critical decision-making processes in AI-driven organizations compared to their competitors. For more information, review the note Navigating the Frontier: Generative AI's Promise and Peril for Product and Product Marketing Managers.

Recommendations

As technology rapidly advances, keeping up is vital. The survey reveals that most tech leaders anticipate higher technology budgets for 2024, with a focus on data analytics, cybersecurity, and artificial intelligence. The rising concerns over data security and the transformative potential of AI in business underscore this emphasis.

AI and automation have transitioned from futuristic ideas to present-day tools. Applications range from chatbots managing customer inquiries to AI algorithms deciphering market trends. It's advisable to designate a part of your budget for pilot projects in these fields. Begin with modest initiatives, assess their impact, and then expand accordingly. Agility and adaptability are essential in this approach.

Customer experience (CX) has long been a critical topic, but priorities are evolving. If CX efforts aren't meeting ROI expectations or aligning with your 2024 strategic objectives, reevaluation may be necessary. This doesn't suggest cutting the CX budget without thought but rather redirecting resources toward areas with potentially more significant returns, such as data analytics, AI, or cybersecurity.

Conclusion

The year 2024 stands as a crucial period for technology leaders, marked by increasing technology budgets that offer a chance for significant investments in critical sectors like data analytics, cybersecurity, and artificial intelligence. Maintaining operational efficiency through regular technological audits and optimizing resources remains a top priority for your customers. A focus on scalability and security is essential.

Successful marketing organizations effectively navigate budget limitations and proactively pursue innovative growth tactics, including full-funnel marketing and novel media strategies, frequently resulting in substantial market growth compared to their competitors. Success in this evolving landscape hinges on strategic, agile planning and a dedication to continual adaptation with a full-funnel strategy and your go-to-market strategies.

Other Related Publication and Deliverables:

• Robinson, Kelsey. “Funnel vision: Marketing with an investor mindset!” McKinsey Podcast, 5 October 2023.
• Odom, Emory. “Budgeting for 2024: Expectations on the Rise for CIOs and Tech Leaders.” National CIO Review, 25 October 2023.