 From theCUBE Studios in Palo Alto in Boston, bringing you data-driven insights from theCUBE and ETR. This is Breaking Analysis with Dave Vellante. Is the glass half full or half empty? Well, it depends on how you want to look at it. CIOs are tapping the brakes on spending, that's clear. The latest macro survey data from ETR quantifies what we already know to be true, that IT spend is decelerating. CIOs and IT buyers forecast that their tech spend will grow by 5.5% this year. That's a meaningful deceleration from their year-end 2021 expectations. But these levels are still well above historical norms. So while the feel-good factor may be in some jeopardy, overall, things are pretty good, at least for now. Hello and welcome to this week's Wikibon Cube Insights powered by ETR. In this Breaking Analysis, we update you in the latest macro spending data from Enterprise Technology Research, including strategies that organizations are employing to cut costs and which project categories continue to see the most traction. Now, CIOs were much more optimistic at the end of last year than they are today. Back then, they thought their aggregate spend would increase by more than 8%. Of course, at that time, the expectation was that the economy was ready to make a semi-ordered return to normal. And that didn't happen, as you well know. And you can see here, the expectation for spending this year is down to 5.5% growth, as we said. And this is based on the most recent ETR-CIO and IT buyer survey, which includes more than 1,100 responses. So we started the year above 8%, then made a meaningful decline into the mid-sixes and nine months into the year, we're now in the mid-fives. But this is still two to 300 basis points above historical norms for IT spending. And looking ahead to next year, CIOs are expecting accelerated growth, edging back up toward that 6% level. Now, as noted here, the visibility on this is probably less clear than pre-COVID years, of course. But the bottom line is digital transformations are continuing to push IT spending above historical levels. Now, the problem, as we know, is earning estimates are coming down and forecasts are being lowered every day. I mean, as the saying goes, the first disappointment is rarely the last. Even the semiconductor industry is seeing softness. Just this past week, we saw AMD lower its quarterly revenue forecast by more than a billion dollars as PC demand in the second half has significantly softened. But again, that's relative to some pretty amazing PC growth in the past couple of years, thanks to the isolation economy. So we do see CIOs tapping the brakes and these data points here tell an interesting story. ETR asked respondents about various actions that they're taking and these two stood out. The top line is we're accelerating new IT projects and the bottom line is we're freezing IT projects. And you can see the convergence of those two lines which of course signals a slowdown. But again, these are not alarming data points if you think about history. If you go back to Q1 2020, for example, just before the pandemic, that top line, that was a 12% versus where it is today at 25%. And if you look at project freezes, they were at 22% in Q1 of 2020, which is significantly higher than today. So relatively speaking, the spending dynamic is still strong. It just doesn't feel that way because we're coming out of an historic anomaly. Now ETR asked a follow-up question to respondents that indicated that spending would be down this quarter relative to the same quarter last year. So they wanted to better understand the most common actions that organizations would take to save money. And that's what this chart shows. The most common approach is still to consolidate redundant vendors across the lines of business. That was over 30%, as you can see here in the first set of bars. So presumably CIOs now have the latitude to go after so-called shadow projects, shadow IT, and implement standards across the organization via vendor consolidation. As well, it was a big jump in the survey from 14% to 20% of respondents saying that they were going after the cloud bill. And that relates to the fourth set of bars, which is scrutinizing consumption-based services. So combined, 45% of respondents are looking at reducing their on-demand spend. Now, some of that may be SaaS related, but most of the SaaS spend is committed. So it was pre-committed. But we do see organizations doing more audits and trying to eliminate or reduce orphaned licenses. Now, the last data point that we want to focus on is the technology sectors that are of the highest priority. You can see here on the set of bars on the left while cybersecurity remains the top technology area, even this sector is showing a little bit of softness. What's really notable is the uptick in data related areas, that second set of bars. This category is now the second most cited taking over from cloud, which as you can see, remains strong. And of course, cloud continues to be a key component of digital transformations. As we've previously reported, machine learning, AI and RPA are somewhat more strategic and more discretionary. And they've dropped below the 40% mark in terms of net score in the overall survey. We're not showing that data here, but we covered this in our last breaking analysis ahead of our UI path event. Now, you have to remember these are the top seven sectors and there are dozens in the ETR taxonomy. So making this list is goodness from a spending perspective. So even though there's some softness in most of these categories, these are the ones CIOs are most focused on addressing. So the big takeaways of this data are spending targets are coming down to the mid 5% range. But this is meaningfully higher than historical norms. And while CIOs, they are pumping the brakes on projects, they're still moving forward at rates faster than pre-COVID levels and they're freezing fewer projects. Remember, as well, this could be a skill shortage in play, but the slowdown is more likely related to the economic uncertainty. You know, we're seeing the two-sided coin of pay-by-the-drink consumption models, right? You can dial it up as you need to, but you can also dial it down. And that's one of the alluring features of on demand. And we're seeing firms give more scrutiny to the cloud bill, why wouldn't they? And there's a bit of unsurprising backlash to the flaws in today's SAS pricing model that locks you in for specified terms. So people, when their term comes up, are really going to scrutinize whether or not they have orphan licenses and try to reduce those. And it appears that the real savings can come from eliminating redundant vendors. That seems to be the biggest number one strategy. And that could favor some of the larger firms. Think Oracle, Dell, Salesforce, ServiceNow, IBM, HPE, Cisco and others, they may benefit from having more of larger footprint across the organization, having that one throat to choke and one back to pat, as some like to say, but they could benefit those larger companies in least in the near term. Now, having said that, we do see an uptick in data related areas as a priority for CIOs. And that could mean companies like Snowflake are in a strong position and can continue to thrive. Even though, as we reported a couple of weeks ago, virtually all companies and sectors in the ETR dataset are showing some softness related to spending momentum from previous quarters. ETR will release its results next week and then we'll dig into the specific vendor action relative to previous quarters. So look, it feels like a meaningful slowdown, but the sky is by no means falling. There are these kind of out of our control factors like interest rates and Ukraine and oil supply and wages, et cetera, that are creating this uncertainty and causing firms to be more cautious. But generally, we remain optimistic as leading tech companies are pretty well managed and have a lot of runway on the balance sheets and can adjust costs to reflect the uncertain environment and remain flexible in their business models and doing so. Okay, that's it for today. Thanks to Alex Meyerson who's on production and he also manages the podcast for breaking analysis. Ken Schiffman is also out of our Boston studio as well. Kristen Martin and Cheryl Knight, they helped get the word out on social media and in our newsletters and Rob Hoef is our editor-in-chief over at SiliconANGLE who posts our breaking analysis and does some great editing, so thank you to all. Remember, all these episodes are available as podcasts, wherever you listen, all you got to do is search breaking analysis podcast. I publish each week on wikibon.com and siliconangle.com and you can email me at david.volante at siliconangle.com or DM me at dvolante or feel free to comment on our LinkedIn posts and please do check out etr.ai for the best survey data in the enterprise tech business. This is Dave Vellante for theCUBE Insights powered by ETR. Thanks for watching and we'll see you next time on breaking analysis.