By most accounts, global IT spending in 2016 will increase some over 2015, but not by much:
- According to Gartner, “worldwide IT spending is forecast to total $3.54 trillion dollars in 2016, just a 0.6% increase over 2015 spending of $3.52 trillion dollars.”
- Almost one half (46%) of respondents to Computerworld's Tech Forecast 2016 survey indicated that their technology spending will increase in 2016, on average by 14.7%. (By comparison, last year 43% said spending would increase, on average by 13.1%.) Close to an equal number (42%) reported that their technology spending will remain the same, with only 12% anticipating a decrease in IT budgets.
As covered in NTT DATA’s last SAP Advisor blog post, across the board, industry pundits predict spending on digital transformation will remain strong in 2016, and beyond:
- IDC predicts digital transformation to be a key strategy for 67% of the Global 2000 by 2018 and that by 2017, over 50% of the IT budget will be spent on new technologies.
- IDC expects cloud software will grow to surpass $112.8 billion by 2019 at a compound annual growth rate (CAGR) of 18.3%.
- Gartner “forecasts that 6.4 billion connected things will be in use worldwide in 2016, up 30% from 2015, and will reach 20.8 billion by 2020.”
- Gartner predicts that “in 2016 5.5 million new things will get connected every day; and Internet of Things (IoT) will support total services spending of $235 billion in 2016, up 22% from 2015.”
- As reported in Fortune, Forrester reports that software-related spending will increase 5.7% over 2015 to reach $600billion, with SaaS spending jumping 24% to $108 billion in 2016.
- Increasing wallet share by improving customer engagement?
- Driving costs and inefficiencies out of your supply chain?
- Growing incremental revenue through product innovation?
- How important is speed and agility to these business objectives?
- What internal and external information is needed to achieve them?
- What internal and external information is accessible?
- What existing systems will need integration and renovation as you move down this path?
- What are the security and data governance concerns that must be addressed?
LOB execs to lead digital transformation spending (or shining a light on shadow IT)
Working in the trenches of business, LOB execs occupy a privileged position from which to identify where digital can have the biggest impact on customer satisfaction, process efficiency and revenue growth.
Traditionally, however, technology purchase decisions have been made in the CIO/CTO suite, and implementation (or customization) was an IT-led endeavor. The downside of this traditional model is long project cycles, frequent, costly failures, and the disillusionment of business users forced to use the clunky applications and rigid business processes developed by IT departments that lacked intimate knowledge of their specific pain points and operational needs.
Technological innovations in cloud, mobility, analytics and IoT, coupled with streamlined procurement and deployment processes, are changing things fast and forever. Instead of relying on the IT department to handle everything relating to technology spending, LOB executives have learned do more on their own.
Known as “shadow IT,” and most often seen in the form of cloud-based solutions and services, LOB leaders have begun to handle their own technology needs without involving IT. While the upside is speed, efficiency and, arguably, cost, the downside of shadow IT can be utterly disastrous – with security breaches and data-governance issues topping the list.
The danger of shadow IT is very real and the damage done is often irrevocable. Calculating the real cost and true ROI of technology investments is complex; holistic, in-depth knowledge of enterprise IT architecture is beyond the purview of your average LOB leader; signing a contract without the proper knowledge of SLAs can lead to a tech nightmare; and one need only scan newspaper headlines to learn how dire a breach of sensitive customer data can be for a company.
Despite these formidable risks, shadow IT is still practiced today at an alarming rate. According to recent data from Cisco Systems (as reported in WSJ), CIOs estimate their organizations use 91 cloud computing services, on average. But a more accurate average, according to Cisco, is 1,120. Cisco reports that shadow IT activity is up nearly 70% from roughly six months ago.
For years organizations have struggled to balance end-user demands for speed and agility with IT requirements for security, performance, and governance. The highly consumable nature and ease of use of digital technologies has shifted more IT purchasing power into the hands of business leaders, with IDC forecasting that by 2018 LOB executives will control 45%+ of all IT spending worldwide and more than 60% in the U.S.
LOB and IT must come together for successful transformation
At NTT DATA, we understand how vital clear and thorough communication between IT and business end-users is to a successful business process transformation initiative, and we place great emphasis on having in place for every engagement a qualified liaison between business users and IT development teams.
When embarking on a digital business initiative, we advise LOB execs and CIOs to combine their focus on re-thinking end-to-end business processes -- from the customer all the way into core systems, an endeavor that neither can successfully complete on its own.
Answering the following questions is a good place to start when building a sound digital business strategy:
What are your organizations’ top priorities?
Answering these strategic questions will help you identify the specific business processes to focus on, and enables you to put in place quantifiable customer-value objectives.
Important questions that naturally follow from this point include:
Many important question remain, but by working together on their company’s digital strategy, LOB and IT leaders can avoid the pitfalls of shadow IT, ensure that results come faster and have greater impact, and lay a solid foundation upon which to build further transformation.
Learn more on NTT DATA’s Enterprise-Grade digital business or Contact NTT DATA today!
Post Date: 2/5/2016