Inflation in the IT sector

Corona and the war in Ukraine have led to massive price increases across all sectors. Not only traditional supply chains have been affected, but the impact has also been clearly felt in IT.

At least that was the result of a survey conducted by Intero Consulting among a number of managers and financial officers in various companies. The topic is highly relevant across all sectors and achieved an average score of 7.8 on a scale of 1-10 (10 = very relevant). In the financial services sector, the topic was rated even higher with a score of 8.1. There were virtually no downward outliers - only 12% of companies scored below 7, i.e. values that indicated average or lower relevance.

The effects are particularly noticeable for energy and software, ahead of hardware, consulting and personnel. Building costs are less relevant. Here too, financial service providers in particular stated that the individual cost types - with the exception of personnel costs - play a major or very major role in IT, with energy and software leading the way

The survey also looked at possible countermeasures. Of the nine measures available for selection, digitalization and automation, usage optimization and supplier negotiations scored the highest. At least 65% of companies are planning measures in this area, are already in the process of implementing them or have already done so.

In the fewest cases, implementation had been finalised, with nearshoring and offshoring peaking at 15% of respondents. Comparatively few were undecided. A maximum of 25% of participants stated that they were still evaluating the measures - with the exception of the introduction of alternative technologies. Here, 50% of companies are still analysing the corresponding potential. In line with the high values for software costs, several participants pointed out that they would like to use additional expertise in the use of licences in the software sector to optimise costs.

Many assessments confirm the experience of Intero Consulting. Usage optimisation and supplier negotiations are indeed always quick and effective levers for taking action against price increases. We are more sceptical about the cost impact of digitalisation and automation. As a rule, this measure increases IT material costs, while the targeted reduction in personnel is usually not fully realised and new areas of responsibility have to be filled instead. In our opinion, optimising usage and selecting the right technology is a rather underestimated potential for reducing costs in the medium to long term.

A total of 26 respondents from various sectors and company sizes took part in the survey. Further details of the survey can be requested from Intero Consulting using the contact details provided.