How spending & disruption sync in the IT sector
Originally published on LinkedIn
Gartner has recently shared its latest IT spending forecasts, and they show that disruption, whilst painful in some market segments, remains nonetheless a force for positive change.
In any case, these changes are real and it’s worth reflecting on some of Gartner’s high-level conclusions and observations. With IT spending flat (according to Gartner), organisations are either consolidating, delaying, or seeking new solutions that deliver more value in non-traditional ways .
Gartner elaborates on some of the factors at play, not least (and not surprisingly) the onset of cloud investment. Organisations in effect plan to reinvest in new technology to help them survive in the world of digital disruption.
While overall spend appears to be conservative, under the numbers sits an important context: investment is being made in technology that lets organisations deliver more value, faster and more flexibly.
Organisations have to pivot quickly, and being digital gives them that flexibility. They will consider new hardware, but they won’t simply exchange new for old: they want something ‘different’ from old, and ‘different’ should allow them to be more nimble, tackle digital disruption, and grow.
Optimisation remains important, not just to save money or otherwise return profit to organisations, but to help business grow exponentially. The days of CIOs managing costs for efficiency are being replaced by managing costs to redeploy in new IT areas, including cloud, infrastructure as a service, and IT sitting inside business units.
The central, consolidated IT infrastructure model, built and maintained for maximum efficiency at an optimised cost, is morphing into a hybrid model moving closer to the business groups.
This brings IT close to the business accountability coalface: businesses will know how their IT has delivered, and will make their own decisions about ROI. There is a closer correlation between business outputs, results, and IT inputs.
Digital alternatives are challenging the status quo in all directions, across all segments and across all industries – because businesses know that going digital will make them more agile. It’s the opportunity to prepare and be ready for change – to be able to take action quickly, and to redeploy resources that include IT resources – that counts.
Gartner reports cloud software investment is growing at a rate six times that of non-cloud. Similar numbers, albeit less comparable according to the Gartner analysts, apply for infrastructure as a service.
Organisations that are buying new servers (according to Gartner) are those investing to provide IaaS, SaaS and other cloud services as independent (outsourced) service providers. The simple conclusion here might be that in-house IT departments are spending less themselves as they outsource to these service providers. Yet this implication – that in-house spend is waning – should be regarded with some care. In our experience, what’s happening is that IT managers and CIOs are looking for the best returns on new server infrastructure, by which we mean a balanced combination of in-house and outsourced server capacity. They will go to the cloud in various guises when it makes sense for them to do so, and then balance that with some in-house capacity, perhaps to retain control of key services and capacity themselves while having the flexibility of on-demand scaling through SaaS and IaaS. Those balances continue to change within organisations and differ between organisations.
It’s also interesting to see that investment in cloud services as a proportion of the total is increasing – the market remains flat, and investment is moving within it.
The impact on organisations has little to do with new ways to buy software and applications, and everything to do with becoming a digital business. In other words, it’s about evolving away from being an “IT business.” It’s also about equipping organisations to be able to deliver more value, ahead of time, so that they are ready, and so that they can afford to invest early to be able to move quickly. One example is Services New South Wales in Australia, which is seeking new ways to use analytics, big data and social media to overcome the fact that 97% of fire alarms are false.
What’s more, growth will come from still-emerging markets, mainly in Asia, for two reasons: they are not constrained by the same level of legacy investment as established markets and the markets are large. Specialised companies focusing on analytics and cloud implementation will surface, regionally and locally. The conclusion is clear: scalable IT on demand is replacing fixed-asset IT investment and infrastructure.
Disruption occurs at every level, delivering positive new ways to do business and deliver value. New competitors operating in expanding markets are making incumbents sharper. More IT spending takes place outside the IT department.
Watch this space! I certainly am. But also very interested in hearing your thoughts.