We now live in a digital-first world. People interact so heavily with their devices, and millions of objects are now digitised in the internet of things, that digital competes with, blends, and sometimes takes precedence over analogue ways of doing things. However, approaching digital innovation from a technology centric approach may be a mistake. The traditional rock-solid foundation of IT – including the yearning to control all the variables – is colliding with the fluidity of human behaviour. In other words, IT must start with the digital human.

Build from the outside in
Leading companies are already letting go to seize the opportunities offered by digital humans. For example, Scandinavian Saxo Bank has reinvented the relationship between customers and its experts. It noticed that some of its individual customers far outperform others, even beating the best professional experts in their investment choices. “Why not turn this customer expertise into guidance for others?” it thought. Or help the bank make its own investments? Now the crowd of digital-first experts is leading Saxo Bank’s in-house experts with real-time guidance.

This means that the value of a future bank will not be measured by how many experts it has, but by how many successful customers it has in its network. And this may mean a leaner, more efficient bank.

For companies like Saxo and other digital businesses, every company is a technology company, and this means three changes for IT in business:
1. how power is distributed amongst and within businesses
2. how technology investments are made
3. how IT allocates people and designs its organisations

Power shift
Not only is every company a technology company, but the shift in IT spending means that business units, not the IT department, drive digital development. These new digital start-ups sit inside the organisation. For IT, this means that there are digital start-ups sitting in the marketing, HR, logistics or sales organisations. They act like technology start-ups. Our data shows that 38 percent of the total IT spend is now made outside of the IT function and a disproportionate amount in already spent on digital solutions. By 2017, the number will be over 50 percent.

Investment change
In the typical IT budget, services contracts tend to be long term. Software takes time to implement and requires costly maintenance. Hardware replacement cycles are too long for the cloud era. Alternatively, digital start-ups own less hardware and use software in the cloud. As a result, by 2018, businesses will own only half of the world’s server computing capacity.

Talent for 2020
People create a large expense in the traditional IT organisation, especially as they support legacy systems. Digital-first organisations start with external services, hiring fewer personnel and managing a portfolio of suppliers with short-term contracts. Indeed, some will have one quarter of the number of people as compared with traditional IT departments that support organisations of similar size.

While today’s top digital business roles are in mobile, user experience and data sciences, by 2020 we’ll see a surge in specialised new roles such as integration specialists and digital business architects, as well as regulatory analysts, risk professionals and attorneys.

The rise of smart machines that perform a wide variety of both physical and intellectual work will bring yet more change to our workforce. Five years from now drones will be a standard part of operations in many industries. Knowledge work will also be automated, for example, machines that can grade students’ essays and inspire them to work harder. Gartner predicts that one in three jobs will be converted to software, robots or smart machines by 2025.

CIOs must lead the digital charge
While half of CIOs think they are leading the digital charge, only 15 percent of CEOs agree. Now is the time for IT leaders to partner with digital startups inside their organisations, or to incubate their own technology start-ups within IT.

ABOUT PETER SONDERGAARD//

Peter Sondergaard is senior vice president of Gartner Research. He advises senior business and government leaders across the globe and leads Gartner’s global research organisation of more than 1000 experts in IT, supply chain and marketing. His leadership drove all-time-high revenues for Gartner Research of more than $1.3 billion in 2013.