Efforts to invest in IT to support digital business are being undermined by an “undercurrent of economic uncertainty”, according to analyst firm Gartner’s latest worldwide IT spending forecast.
Global IT spending is forecast to total $3.49 trillion in 2016, a decline of 0.5 per cent over spending of $3.5 trillion.
“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 optimisation efforts in some areas to fund digital business in others,” said John-David Lovelock, research vice president, Gartner.
He said savings from legacy system optimisation and enhancements are often being redirected 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 in a time when revenue growth does not support runaway IT budgets is forcing more organisations to optimise as a first step. Business processes, as well as IT, are undergoing optimisation – digital business requires both. However, many CIOs are reluctant to raise this possibility, given the cultural and political barriers to optimising business costs.”
According to Gartner, the results of these optimisation efforts can be seen in the switch in spending from assets to services.
“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,” Lovelock said. “Things that once had to be purchased as an asset can now be delivered as a service. Most digital service twin offerings change the spending pattern from a large upfront payment to a smaller reoccurring monthly amount. This means that the same level of activity has a very different annual spend.”
Global enterprise software spending is expected to total US$321 billion – a 4.2 per cent increase from 2015, while spending in the IT services market is predicted to return to growth in 2016, up 2.1 per cent to US$929 billion from 2015, when the market posted a 4.7 per cent decline.
A stronger outlook for IT services in Japan and India is nearly balanced by a weaker outlook in Brazil, China and South Korea.
Gartner will present a complimentary webinar on the results of the latest forecast, ‘IT Spending Forecast, 1Q16 Update: Where Is All the Money Going?’ taking place April 12 at 11am EDT.