Throughout 2021, the pandemic influenced corporate buying behavior as hybrid work models became more permanent, replacing ad-hoc strategies initially used to support remote workers. Organizations changed their buying behavior in favor of more flexible, efficient, and cost-effective IT strategies, according to Tangoe’s newly released 2021 Market Trends Report.
Tangoe gathered the data from the massive amount of information it has on IT purchasing trends. The company provides technology expense management and managed mobility services to over a thousand enterprise companies, including half of the Fortune 500. It manages $40 billion in technology expenses paid across 120 countries.
The inaugural Market Trends Report features data, insights, and trends in the IT industry collected from technology spend that Tangoe manages on behalf of these clients. The report includes market trends driving both buying behavior and the corresponding pricing strategies.
Technology Buying Shifts to Support Remote Workforce
Over the last year, changes in IT buying behavior were most prevalent in three areas:
- Corporate cost consolidation
- Flexible connectivity
- Distributed operations
Organizations modified their networks to meet the needs of clients and employees in a post-pandemic environment. Thanks to a more distributed workforce, organizations were able to reduce bandwidth and lower telecom costs, which decreased 8 to 12 percent year-over-year (YoY).
At the same time, spending for unified communications as a service (UCaaS), hosting, security, and professional services increased more than 25 percent YoY, as organizations adjusted to the changing environment.
Flexible work models demand greater security to prevent unauthorized access to corporate networks. Today’s organizations are trying to a find a balance between flexibility and security, turning to ethernet, fixed wireless, and broadband as more permanent solutions for hybrid workers.
Work from Home Evolves to Hybrid Work
I know many of the “work from home” stocks – such as Zscaler, Zoom and Avaya – have had a big cut in stock price as investors fear the shift in spending was temporary. I don’t believe this is a case, as most of the vendors in this category are critical to hybrid work.
The reality is that people are not going back to the office any time soon. My research has found that 51% of employees will work from home two to three days per week and another 14% will do so one day per week.
Tangoe has also observed a shift in network spending to software-defined wide area networking (SD-WAN) and 5G, as both technologies have recently gained traction. This has caused a decline in multiprotocol label switching (MPLS) rates in all regions globally.
In the U.S., MPLS ports below 1 gigabyte (GB) were flat YOY, while MPLS ports at or above 1GB were down 30 percent YOY. Internet rates are also declining in double digits. Internet ports costs below 1GB were flat YoY and those greater than 1GB fell 25 percent YoY.
SD-WAN and SASE See Significant Boost
This pivot from MPLS to SD-WAN was already underway prior to the pandemic but saw significant acceleration as organizations looked to increase network agility.
I fully expect SD-WAN spend to continue to eat away at the historically overpriced MPLS circuits. The large global carriers will offer hybrid services and will continue to bring pricing down, which is good news for buyers.
On the telecom front, interstate session initiation protocol (SIP) rates declined 25 percent YOY, the report found. Meanwhile, mobile carriers are beginning to move away from a pure subsidized model and instead offering device purchase plans that are separate from monthly plans. Carriers are incentivizing companies with competitive contracts to make the switch to 5G, although the adoption rate of 5G for fixed wireless access remains low.
Looking at security, the report found that ransomware attacks jumped a whopping 150%. The Tangoe report didn’t delve deep into security spending, but this is another area that has seen a significant shift in the way customers are buying. Hybrid work has shifted spending from the traditional on-premises-based hardware to cloud-based security in the form of secure access service edge (SASE).
Tangoe recommends prioritizing agile infrastructure, cybersecurity, and unified communications, as these align better to hybrid IT where IT pros are working remotely. Much has been made about the impact to workers, but little has been discussed around how the job of IT has changed. Businesses are becoming increasingly dynamic and distributed and IT spend will continue to shift to models that support this generational shift.