A July 2022 survey of more than 200 CFOs and finance leaders showed that real estate/facilities management and finance functions were the most likely to face budgets cuts in the next 12 months, according to Gartner, Inc. Survey respondents identified IT and sales as the functions most likely to be getting increases.
“Given that 72% of CFOs want to trim their organization’s real estate footprint by the end of 2022 it’s to be expected that facilities management is looking at budget reductions,” said Marko Horvat, vice president, research in the Gartner Finance practice. “This makes sense for many organizations where a large share of employees is working from home at least part of the time. However, it’s also interesting to note the 9% of companies that are differentiating by increasing their real estate spending in the next 12 months.”
IT is the most popular function for increasing spending with 40% planning increases in the next 12 months, and this sentiment is holding steady from a similar survey in May 2022 when 46% of CFO respondents said they planned to scale up enterprise digital initiatives in the next two years (see Figure 1).
“CFOs see digital technology as a smart long-term bet, but it’s also a critical part of their plan to tackle the effects of rising inflation on corporate margins,” said Horvat. “Nearly a quarter of CFOs think greater automation will help to combat inflation, and this aligns with CEOs who are even more bullish on tech with 85% planning to increase spend over last year.”
Sales and R&D are the second and third most likely functions to see increases in the next year with 31% and 29% of respondents planning increases.
“The investment in sales and R&D shows that companies are not abandoning their growth bets at the current time, and they are turning to two functions to drive growth in difficult conditions,” said Horvat. “This is broadly consistent with our surveys through May and June where CFOs and CEOs selected these areas as being the most likely to protect from cuts.”
Gartner experts noted that “efficient growth” companies — those which used spending to differentiate themselves from competitors during times of economic difficulty, rather than relying on cuts — tended to achieve better sustained growth and margin improvements in the long term.