It is a truth universally acknowledged that a single man in possession of a good fortune is probably working in IT. Staff remain the single biggest expense for IT departments — but that won’t necessarily be the case in the very near future.
In the opening keynote at Gartner Symposium/ITxpo 2014, analyst Peter Sondergaard discussed the typical IT spend in most organisations. This is how it breaks down:
- Services: 23%
- Software: 20%
- Hardware: 16%
- Personnel: 41%
That’s changing because of stealth IT, where business units invest in technology without consulting the existing IT function at all. “38% of total IT spend is already outside of IT, with a disproportinate amount in digital, and by 2017 it will be over 50%,” Sondergaard said. “50% of IT salespeople sell direct to business units. They are looking for new money flows. And every business unit is a technology startup. They have no installed base of technology. ”
“CRM deployments will be half in the cloud by 2016, and ERP will follow. Adoption of SAAS will keep accelerating through the end of the decade while on-premise will slow down.”
That speed of adoption contrasts dramatically with current IT. “Our traditional software deals can run for decades,” Sondergaard said. “It takes 10 years for an ERP system to get rolled out, on average, and maintenance payments are twice the cost of the initial purchase. This is not the model for a fast-moving operation.” The same goes for hardware — “our traditional IT replacement cycles are way too long” — and cloud is changing that rapidly. “We predict that by 2018, businesses will own only half of the world’s server computing capacity.”
People remain the biggest cost and the biggest problem. “People make up a huge cost in the traditional IT organisation, with many supporting older legacy systems. We have many in infrastructure and operations, and lots in legacy app support. Most are close to retirement age forcing you to rethink your approach to talent.”
Sondergaard contrasted the traditional approach with the spending patterns of digital-first businesses. “They run lean — sometimes with a quarter of the number of people compared to traditional IT departments,” Sondergaard said.
Their spending breakdown on staff is also very different. Just 10% goes on supplier management, and 15% on infrastructure and operations. A whopping 20% goes on data scientists, 20% on product design, 17% on software developments and 8% on user experience.
Can you switch from one approach to the other? Yes — but it can be a hard sell. “Digital business models could initially have lower margins and require a major startup investment,” Sondergaard said. “The dilemma lies between a topline erosion of high margin businesses versus a leaner growing digital business with less profit that survives.”
That doesn’t mean the change has to happen overnight. “Many initial digital businesses will focus on what is natural: cost, efficiency and user experience. Success there will give you the credibility to move into revenue generating opportunities, and to convince senior executives about the full scope of the opp. It’s not just about efficiency, but it can be and it will be about growth.”
Presuming you can’t change your own organisation, what new roles should you pursue? Sondergaard suggests that we’ll see rapid changes. Here are the hot job opportunities right now, in 2017, and in 2020:
|Internet of things
Throughout this week, Lifehacker is covering Gartner Symposium/ITxpo 2014 live from the Gold Coast, bringing you practical tips and advice for running business IT more effectively.
Check out all our stories from the event.
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