Published on the 08/04/2016 | Written by Newsdesk
Investment in business process optimisation needed to make digital businesses fly is proving a hard sell for CIOs…
Every quarter Gartner, the fount of technology predictions, publishes its quarterly forecast on worldwide IT spending. While vendor hype keeps the spotlight on the hot tech topics, the spend forecast gives a better idea of where people are actually spending their money – and where we locals diverge compared to the rest of the world (also known as the USA).
And things are looking iffy in the States. Gartner is forecasting a small drop in IT spend; down 0.5 percent to US$3.49 trillion to be precise, although when you are talking in those orders of magnitude, any drop is noticeable. The experts at Gartner are putting this down to simple economics: “There is an undercurrent of economic uncertainty that is driving organisations to tighten their belts, and IT spending is one of the casualties,” said John-David Lovelock, research vice president at Gartner in a statement.
But, he pointed out, this is the time when the need to invest in IT to support digital business is more urgent than ever. “Business leaders know that they need to become digital businesses or face irrelevance in a digital world. To make that happen, leaders are engaging in tough cost optimization efforts in some areas to fund digital business in others.” As an example, Lovelock said the savings from legacy system optimisation and enhancements are being redirected to fund digital initiatives. “It’s about doing more with the same funds.”
Local business leaders have got the message; across A/NZ the majority of IT investment is in services and continues to increase, meanwhile devices and data centre spend remains lower and static or even in decline. Overall IT spend forecast in Aussie is almost A$79.9 billion, up 2.5 percent, and in New Zealand it’s NZ$11.5 billion, up 1.4 percent*.
Lovelock explained the shift from asset spend to service spend (which is in evidence around the world) saying that most traditional IT now has a ‘digital service twin’ — license software has cloud software, servers have Infrastructure as a Service, and cellular voice has VoLTE. By moving to smaller monthly payments he said that the same level of activity has a very different annual spend. It’s all part of that overall trend towards optimisation in preference to big-bang IT projects. Unfortunately digital business not only requires IT optimisation but also business process optimisation and Lovelock said that’s a tough ask. “Many CIOs are reluctant to raise this possibility, given the cultural and political barriers to optimising business costs.” Hopefully that will change or promising new business models could end up falling flat on their face.
| Country | Segment | 2015 YR | 2016 YR | 2017 YR |
| Australia | Devices | 10,866 | 10,657 | 10,397 |
| Data Center Systems | 2,806 | 2,763 | 2,809 | |
| Software | 9,315 | 10,206 | 11,203 | |
| IT Services | 28,507 | 29,043 | 29,663 | |
| Communications Services | 26,410 | 27,199 | 27,843 | |
| Grand Total | 77,904 | 79,867 | 81,915 |
| Country | Segment | 2015 YR | 2016 YR | 2017 YR |
| New Zealand | Devices | 1,772 | 1,742 | 1,754 |
| Data Center Systems | 375 | 382 | 388 | |
| Software | 1,280 | 1,388 | 1,505 | |
| IT Services | 3,498 | 3,575 | 3,649 | |
| Communications Services | 4,390 | 4,391 | 4,414 | |
| Grand Total | 11,316 | 11,477 | 11,709 |
More detailed analysis on the outlook for the IT industry will be presented in a complimentary webinar “IT Spending Forecast, 1Q16 Update: Where Is All the Money Going?” taking place April 12 at 11 a.m. EDT.
*NB When reported in US dollars, the A/NZ It investment forecasts show as a decline in spend due to currency fluctuations.
