Global IT spending is expected to decline in 2016 as economic uncertainty forces enterprises to “tighten their belts” when it comes to technology budgets.
The latest forecast from Gartner said that IT spending across the world will reach $3.49tn in 2016, a decline of 0.5 per cent against the $3.5tn in 2015.
John-David Lovelock, a research vice president at Gartner, attributed the decline to economic challenges, but noted that IT leaders need to overcome these if they are to pursue the trend of digital transformation and keep enterprises relevant in a world of disruptive technology and startups.
"There is an undercurrent of economic uncertainty that is driving organisations to tighten their belts, and IT spending is one of the casualties," he said.
"Concurrently, the need to invest in IT to support digital business is more urgent than ever. Business leaders know that they need to become digital or face irrelevance in a digital world. To make that happen, leaders are engaging in tough cost optimisation efforts in some areas to fund digital business in others."
Lovelock explained that companies should use the savings made by optimising legacy IT operations, for example shifting to the cloud to limit costly on-premise systems, as a way to fund digital initiatives.
"Typically, less than 10 per cent of organisations are in cost-optimisation or cost-cutting mode. However, the need to spend on digital business initiatives at a time when revenue growth does not support runaway IT budgets is forcing more organisations to optimise as a first step,” he said.
“Business processes, as well as IT, are undergoing optimisation. Digital business requires both, but many CIOs are reluctant to raise this possibility given the cultural and political barriers to optimising business costs."
Lovelock pointed out that many legacy systems have cloud-based service alternatives that offer a way to optimise IT infrastructure and move spending models away from large upfront costs to monthly subscriptions.
This effectively allows companies to maintain the same level of IT activity at a reduced annual budget, freeing up funds for investment in digital initiatives.
Lovelock did not explain how the political and cultural barriers CIOs face over IT spending and activity can be overcome, but there are digital leaders in various public and private organisations who serve as good figureheads for how digital transformation can overhaul a company.
The work that Richard Godfrey, former assistant director of Digital Peterborough, has done at Peterborough City Council to rework the organisation’s IT into a mostly digital service-based model is one such example.
A closer look at the Gartner spending forecast highlights a 3.7 per cent decline in spending on hardware as the culprit for the decline in overall spending.
However, spending on IT services, software and data centre systems is set to increase by two to four per cent, suggesting that the move to more digital services is already underway.
Much of the fluctuation in spending is mostly down to variations in economic and political conditions across the world.
But the trends indicate that, despite these variations, the concept of digital transformation and the provision of digital services over IT systems has grown beyond inception and moved into adoption.
To recognise the digital transformation taking place across businesses V3 has recently launched the V3 Digital Technology Leaders Awards 2016 to celebrate the best projects, people and digital teams bringing new ideas to life to benefit customers and their business. Entries are free and open now.
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