 From theCUBE Studios in Palo Alto in Boston, bringing you data-driven insights from theCUBE and ETR. This is Breaking Analysis with Dave Vellante. Throughout the pre-vaccine COVID era, IT buyers indicated that budget constraints would constrict 2020 spending by roughly 5% relative to 2019 levels. But the forced march to digital combined with increased cyber threats created a modernization mandate that powered Q4 spending last year. And this momentum is carried through to 2021. However, COVID variants have delayed return to work in business travel plans and as such, our current forecast for global IT spending remains strong at 6 to 7%, but slightly down from previous estimates. Notably, CIOs and IT buyers expect a 7 to 8% increase in 2022 spending, reflecting investments in hybrid strategies and a continued belief that technology remains the underpinning of competitive advantage in the coming decade. Hello and welcome to this week's Wikibon Cube Insights powered by ETR. In this Breaking Analysis, we'll share the latest results of ETR's macro spending survey and update you on industry and sector spending patterns. First, let's summarize the key takeaways from ETR's latest demand side survey. Based on ETR's latest survey, currently with 869 responses as shown here at the bottom, we expect a slight pullback in spending expectations from CIOs and IT buyers to roughly 6 to 7% down from 7 to 8% earlier this year. This reflects caution over return to office strategies, but buyers continue to expect robust spending, as we said, into next year as they support hybrid models, modernize their HQ infrastructure and continue to move forward on digital transformation initiatives. Cyber security and cloud remain the top two priorities with data initiatives, overtaking collaboration and productivity on the priority list, although all of these remain strong. Organizations now expect around 44% of employees to be working in a hybrid model over the long term, with 37% currently working in a hybrid fashion. Now here's the data behind the revised projections. It compares the spending growth expectations from the March, June and September 21 surveys. This by no means is a radical change, as you can see by the downward trajectory of the yellow bar. It reflects the reality of the continued injection of uncertainty caused by the pandemic. Organizations are dealing with the reality and remaining flexible with regard to strategies and spending outlook. But the 2022 bar on the far right, that's 7.5% stands out and it's telling as buyers expect spending levels in 22 to outpace historical norms by quite a large margin. Now, as shown here, the spending compression is an across the board trend. Only Latin America, industrial materials manufacturing and retail consumer show an uptick from previous surveys with nonprofits, education, energy and APAC showing the steepest declines. But the longer term spending outlook remains robust across the boards. This chart shows that generally the outlook for 2022 spending is strong with retail consumer and government spending leading the charge. Only the historically cautious education sector stands out as softer, but even so it's spending outlook is comparable to historical norms. Now be careful putting too much emphasis by the way on Latin America as the ends are small as ETR noted here. Now let's take a look at the sector analysis. This picture has been amazingly consistent. ETR asks respondents to rate their spending priorities and the chart shows the ratings from highest to lowest priority for the top technology sectors. Now this data only shows the top seven sectors. So even though for instance, RPA appears down the list, it remains one of the highest in the survey. In fact, although we're not showing this data, we went in and looked at this machine learning containers, cloud and RPA remain the top four areas from a net score or spending momentum standpoint well above the 40% mark that we talk about all the time. Back to the priorities we asked the CIOs. Cyber security is noticeably above the rest with cloud migration remaining very strong. The data sector, i.e. analytics and data warehousing have overtaken collaboration and productivity as priorities. However, collaboration remains strong as do networking, AI and RPA. Now when we dig into some of these sectors to see which vendors are showing spending momentum, let's take a look. In addition to the large cloud players, especially AWS and Microsoft, we saw that Snowflake continued to hover at around 80% net score level. Some others that we haven't cited as much recently are popping up either with spending momentum or showing a larger presence in the market or both within these sectors. Thought spot has popped up. Now this AI specialist has shown up every now and then in the survey but they seem to be getting traction in the data set and they have an elevated net score. Datadog also stood out as did Cockroach Labs and Databricks is starting to show some strength even though they've shown strength in past surveys they're starting to show larger presence in the survey. Now in networking, Arista who has always had a strong momentum shows continued strong momentum in Meraki which has a large presence in the data set is also notable, not as high but has a much larger share. Monday.com is also hitting the radar in collaboration and Twilio is popping up as well. Let's take a look at the return to office trends and the actions organizations have taken as a result of COVID and see how that's changed over time. This data shows the time series going back to the June 2020 survey. Let's start with the percent of organizations with employees working from home and you'll note that has ticked up since June and is now back up to 75%. And you can see the noticeable drop in the percentage of companies that have employees fully returning to the office. Also more organizations are canceling business trips. So these are some of the factors that contribute to the slightly more cautious spending outlook that we're reporting here. Now continuing on the chart, even though layoffs are trending downward, it's no surprise giving the skills shortage, you do see a slight uptick in hiring freezes and a downtick in new hiring. So new IT deployment freezes, they remain low but there's a slight downtick in accelerating new IT deployments. So look, these are not radical changes but they do reflect the ongoing day by day, month by month, quarter by quarter adjustments that we've seen companies make throughout the COVID era. And it underscores the need for organizations to be more agile, flexible, resilient and responsive to change. What does that mean? It means modernizing infrastructure and apps, better leveraging data, applying AI and taking care of governance, compliance and security. And CIOs expect these spending priorities to continue for the foreseeable future at least for the next 15 months. Now, as we've declared in previous episodes, every CEO, CXO, corner office, boards of directors they're trying to get hybrid right. Interestingly, we see some companies mandating a return to work. We've seen this with some of the Wall Street firms for example, but tech is a leading example of advocating for remote or hybrid work to wit. Michael Dell's public posture, that he's wide open to remote and or hybrid work and Frank Slutman has moved Snowflake's executive offices to Bozeman, Montana, reflecting his sentiment that the days of big corporate towers are over. And why not? Productivity is through the roof and the cost savings from working remotely can be enormous. This chart shows data back to the December 2020 survey and we've seen a steady decline in remote work, but it's still the dominant model of 53% of the workforce. In other words, people are starting to come back to office but still very, very high remote. Now, jump to the third set of bars. And organizations expect around 39% of employees to be working remotely in six months. Now, jump back to the second set of bars. 37% of employees are currently working in a hybrid model and that's up from 33% in June. Now, jump to the fourth set of bars and the expectation is around 44% will be working in a hybrid model within the next six months. Organizations expect remote workers to settle in and level at about 30%. Now, that's down from previous highs of 35% last December but it's up significantly from the historical average of 15 to 16%. And the expectation as you can see in the last set of bars is that more than 40% of employees will be working in a hybrid model on a permanent basis. So look, the world is going hybrid. It's the future and that requires technology investments to support new ways to work. And that's one main reason why we see the spending momentum continuing into 2022. So let's drill a little bit into what this means. In other words, how are organizations thinking about their hybrid models? This chart shows the responses from the June and September surveys when ETR began asking organizations to describe their hybrid approaches in more detail. The dominant model around 50% of organizations say time will be split between remote and required on site days. This is where leaders will ask employees to come to the office at designated times for a whiteboard sessions or planning meetings et cetera. So hybrid is the dominant model. Then we see a big drop to primarily on site with exceptions as needed and a low single digit number of organizations with no hybrid option. So the message is clear. Hybrid is the way forward and IT infrastructure will evolve to support these models. And this bodes well for tech spending in our view. It speaks to continued cyber investments leverage the cloud for flexible capacity, shoring up on-prem infrastructure as we now see more vendors offering flexible capacity on-prem modernizing applications, building layers with microservices and Kubernetes that can actually connect to the cloud or assist in moving workloads, evolving the network architecture, flattening that out. We hear a lot of talk about the edge, driving automation and new ways to work and putting data at the core of digital business strategies. These are the technology approaches that organizations are tapping to deal with the changing dynamics of the pandemic and adapting to new business models. Across the board, technology has become one of the most important enablers for competitiveness in the coming decade. And we expect that momentum to continue until some exogenous factors derail the spending trend. At the moment, that risk doesn't appear to be a slowdown in an economic recovery, although we continue to watch uncertainties around interest rates, inflation, tax policy and global economic tensions, especially with China. And as always, we'll be here to update you as the data changes. Okay, we're going to leave it there for now. Remember, these episodes are all available as podcasts. You just got to search breaking analysis podcast and we publish each week on wikibon.com and siliconangle.com. You can connect with me on Twitter at dvolante or email me at david.volante at siliconangle.com. Appreciate the comments on LinkedIn and don't forget to check out etr.plus for all the survey data. This is Dave Vellante for theCUBE Insights, powered by ETR. Be well and we'll see you next time.