 From theCUBE Studios in Palo Alto in Boston, bringing you data-driven insights from theCUBE and ETR. This is Breaking Analysis with Dave Vellante. The last 10 months have forced upon us a new digital reality. If you weren't a digital business, you were basically out of business. Hello everybody, this is Dave Vellante and welcome to this week's Wikibon Cube Insights powered by ETR. In this breaking analysis, we're going to share with you some fresh data from ETR on CIO spending, which is giving us a lot of optimism for 2021. We'll also set forth our thinking on the new digital economy and really talk a little bit about where we see some of the opportunities and some of the spending and how those shifts are going to occur in the near term and midterm and even long term. Let's bring up sort of the first set of talking points that I want to share with you. 2020 has been a year of instant pivots, as we all know, and it's forced us to march toward a new digital reality, digital transformation, as everybody talks about, has been compressed by two to three years. But it's really been a Petri dish for everybody. Now, earlier this year, and we've been consistent since we first came out with this forecast of minus four to 5% in IT spending this year. The survey data suggests that even though Q3 saw a big bounce back in spending in GDP, we've still really maintained that minus four to minus 5%. We're seeing a comeback in the lockdown and the virus and as such, we maintain that conservative forecast. Our current 2% growth for 2021 appears to be conservative based on the latest data we have. It could be as high as four to 5% growth in 2021. And we'll update that formally in January, but hold that thought. As part of that, as I said, we've seen accelerated digital business initiatives led to really strong pockets in many sectors. We've seen that in video conferencing, in laptops, obviously we've seen that in certain security sectors that we've detailed like identity access management, like endpoint, like cloud security, cloud itself. And we've seen a big trend toward application modernization. So those sectors of the business, including those other data sectors, we certainly see the ascendancy of Snowflake. Snowflake closed the day on Friday. The valuation of Snowflake on Friday was now above that of ServiceNow. Snowflake's valuation is currently around the same, just slightly under that of IBMs. Think about that. A company that was formed in 2015 is now as valuable almost as IBM, 100 plus year old company. That's quite amazing to think about. Why is that? It's because data now is at the center of the universe and that's obviously what Snowflake's transformation is all about. The pace of the vaccine distribution appears to be accelerated, but as I said earlier, winter is coming in the Northern Hemisphere and that's causing some concern. But overall, ETR survey data suggests that there's really positive signs in recovery and we'll get into that. Companies are learning to leverage the cloud. Cloud migration was a big priority in the last 10 months. That including security and people are realizing that, wow, we can actually change the operating model with cloud and it's helping with our agility and we're going to show you some data that really supports that. As I kind of alluded to earlier, COVID created this massive digital business proof of concept and the learnings from that experiment are going to get operationalized in 2021 and it's going to be a rapid year of invention and reinvention. And so that's why we think IT spending could snap back dramatically in 2021. Now, ETR when it does its surveys will oftentimes do drill downs and I want to share now with you the next slide shows some drill downs from the COVID study. ETR since early this year, since March has been doing COVID studies. We've been reporting on that extensively. ETR was really the first to report that whole work from home pivot really, really early on in the cycle. So we use that as sort of a harbinger of things to come. This slide asked organizations in the past 12 months, what is your thinking on when spending is going to bounce back to 2019 levels? And that's really what's shown in this chart. So, you know, pre COVID levels really was the question. When does your organization expect the IT budgets to return to pre COVID levels? You could see here on the left-hand side, 11% have said they increased budgets since the start of COVID. And those are the ones that are really in the best position, e-commerce, certain e-commerce companies, those where COVID was actually a tailwind. 24% said we're already back to those 2019 pre COVID levels. And then you can see as well, approximately 30% say that within 12 months, they'll be back, 22% say within 24 months. And I know that's a big chunk of the economy in the CIO spend base, but only 4% that it's going to be more than two years. So, a very large portion of the survey base, which is over 1400, suggests that there's optimism in the near term. Now, what we want to show you in the next chart is the factors that really enabled organizations to be agile and resilient during COVID-19. Now, it's no surprise that 84% said that being prepared for a remote workforce. Now, were it not for technology, we really would not have been able to respond to COVID in the way in which we have. And I think everybody really understands that. 44% said business continuity plans, as we've reported in the past, many people told us their business continuity was far too DR focused. They've shifted that focus in the last 10 months really toward being able to pivot their businesses and identify new opportunities. And so that's something that we feel is going to carry through into 2021 and beyond. 39% said C-suite flexibility. I think this is a really important point where the C-suite recognized the importance of investing in technology and really understanding that it's now a strategic enabler, of course always has been it, but now more than ever. You can see also that 30% said budget flexibility enabled them and that is as a function of we got low interest rates, many, many corporations if not most corporations improve their balance sheets by tapping corporate debt. And only 27% said emerging technologies. I shouldn't say only 27% cited emerging technologies as a primary factor that enabled their business resiliency. And I would argue that many of the emerging technologies probably falls into that 84% on that left-hand bar. So overall, you can see that the priorities of CIOs have shifted in the last 10 months and it's not just going to snap back to where we were pre-COVID. As we've said many times and many believe these are permanent changes. Now, you may be asking, okay, where is the action going? Where are people spending? What are they adopting as new technologies? And that's really what we want to show you here in this next slide. So what this slide does, you may recall the net score methodology that ETR uses. Net score is a measure of spending momentum. Basically what it does is it breaks down those companies that are spending more versus or a company that breaks down the percentage of that company that's spending more versus spending less on a particular technology. So it's really, there's several components to it. One is new adoptions, the other is spending more, the other is split flat, spending less or retiring. So what we're isolating here in this chart is the new adoptions. And you can see here that we've highlighted a few areas, container orchestration and container platforms. You can see those high. And we're showing three survey bases, October 19, July 20, which is the blue and October 20, which is the yellow. And yes, while the spending is down from some of the previous highs, you can see the elevated levels of container orchestration, container platforms, machine learning, and AI, and robotic process automation. What is that telling you? It says that people are modernizing their applications portfolios. They're applying machine learning and machine intelligence to get more value from data, AI plus data plus cloud is that new innovation cocktail that we've talked about a lot. And then we've also talked about the automation mandate that we haven't seen the productivity improvements in the US and Europe over the last two decades that we would have liked to seen. So there really is an automation mandate. That's what the RPA adoption is all about. So really trying to drive those productivity gains. Now, interestingly, you may look at this slide and say, wow, look at how low cloud is. We hear all the time that cloud migration is a big priority. Why is cloud so low? But let's bring up the next chart and address that. This chart takes that increased spend portion of the net score. Remember I said it's broken down. Adoptions, spend more, spend less, et cetera. This is the increased spend, the spend more. Now look at cloud computing. It's up in the 46% range. That's 46% of the customers that responded in the cloud computing sector said they're increasing spending on cloud. So how do you interpret that from the previous slide? They were already in the cloud. That's why the new adoptions was low because everybody's doing some form of cloud but this is a real tell sign. People are dramatically increasing their spending in cloud relative to some of these other areas. Of course, same with container orchestration, container platforms. It's all about developer productivity, right once, run anywhere type of thing. It hedges for a multi-cloud, bringing on-prem infrastructure into the cloud or on-prem apps into the cloud. That's what you're seeing there with container. So this is the sort of 40% club. Cloud computing, containers, machine learning and AI up at 40% spending more and then again, robotic process automation. So that sort of explains the cloud component and you can see the container, the container orchestration and the automation piece also at very elevated levels. Let me wrap here by talking about some factors to watch and I'll highlight them on this slide. Look, the propensity toward a lockdown definitely creates uncertainty and caution. You've got a new administration, there seems to be more of a willingness to lockdown, to slow down the economy. There's still uncertainty around fiscal stimulus although it looks like that's going to be addressed hopefully in the near term but there's still uncertainty around that. While that does potentially dampen spend for Q4 because of that uncertainty, it also creates further pent up demand. As I said before, there's been 10 months of learnings from this forced march to digital transformations and that is informing 2021 tactical plans and then even longer term plans. Long term planning has changed. When you talk to the C suite and the conversations going on at boards of directors, speed and the ability to turn on a dime. They're now fundamental principles that are being designed into businesses. This is a mainstay of the digital economy. We are entering a new era of digital business and there's going to be the haves and the have nots and the have nots are going to disappear and the haves are going to do better. As I say, boards and CEOs, they got a glimpse of the future in 2021 but it was forced on them, it really wasn't planned but it was an awesome Petri dish and experiment to understand what works, what doesn't and they're now doing a double down on those things that are sure bets and those that don't act, as they say, they're going to be out of business. At the macro, yes, you've got again, haves and have nots and the have nots are going to potentially dampen, you're going to see companies that really got hurt are going to constrict spending, no question and that could dampen spending at the macro but in our view, the survivor is going to prop up spending in 2021, it could be significantly above our initial estimates of 2%, could be as high as double that, maybe even four to 5% in 2021. We're going to continue to watch that, we'll continue to check out the survey data, we'll have a complete update in the January survey and in the meantime, we'll continue to report on the latest trends, both from the CUBE community and also from ETR, so that's it for now, thanks for watching, don't forget, all these episodes are available on podcasts, wherever you listen. I publish weekly on siliconangle.com and wikibon.com, check out ETR plus for all the survey action and please do comment on my LinkedIn posts, you can also reach me at dvolante on Twitter or you can email me at david.volante at siliconangle.com, this is Dave Volante for theCUBE Insights powered by ETR. Thanks for watching everybody, see you next time.