Analyst firm Gartner has predicted that IT spending in Australia will reach $80 billion in 2016, which is a modest 2.8 per cent increase from 2015. So what will businesses spend their IT dollars on? We find out.
Dollar sign on keyboard image from Shutterstock
Gartner's global head of research Peter Sondegaard was at the Gartner Symposium 2015 in Brisbane presenting on IT spending trends across the world and what organisations are keen to invest in next year. He noted that internet of things (IoT) hardware spending will smash past US$2.5 million every minute in 2016 and in five years one million new devices will come online every hour to bring billions of new machine-to-machine interconnections to life.
It's a given that a ton of information will be generated and you'd think data will be the key driver of the IoT trend, but it's actually algorithms that will take centre stage.
"Data is inherently dumb. It doesn't actually do anything unless you how know how to use it; how to act with it," Sondegaard said. "Algorithms are where the real value lies. Algorithms define action. Dynamic algorithms are at the core of new customer interactions."
Large companies such as Amazon and Netflix are already taking advantage of algorithms to ensure they are providing a great customer experience online. Sondegaard foreshadowed the rise of the algorithm economy which will propel the next great leap in machine-to-machine evolution in IoT. Products and services from companies will then hinge on the effectiveness and sophistication of their algorithms to meet the needs of their consumers.
"Organisations will be valued not just on their big data but the algorithms that turn that data into actions, and ultimately impact customers," he said.
So how does this all tie into IT spending? It will up the money companies will put into digital businesses in 2016. According to Sondegarrd, CIOs in Australia and New Zealand expect their organisation's digital revenue to more than double in the next five years, from 14 per cent to 32 per cent. While he highlighted that Australia and New Zealand's move to take advantage of digital business models is slower compared to the rest of the world, major organisations in the region are already investing in building their digital platforms. No doubt this will drive smaller companies to follow suit.
These digital businesses will rely on sophisticated and intelligent algorithms to become successful. It's not just customer-facing processes that will be affected. Internally, CIOs across Australia and New Zealand are keen to implement digital transformation to boost productivity and give their organisations a competitive edge.
"As digitalisation is intensifying, it is becoming clear that hard-coded business and operational models will not suffice and that a more adaptable approach is required," said Gartner vice-president Graham Waller said. "Leading businesses and government agencies are looking less like fixed 'systems' and more like platforms. A platform provides the business with a foundation where resources can come together - with the ability to rapidly configure groups of assets both across the business and the broader ecosystem - to create value."
As for spending across different technology categories, Gartner broke down the Australian and New Zealand results in a top IT priorities list based on a global survey it conducted with 2944 CIOs. This list also compares the local and global rankings. The percentages represent the proportion of CIOs citing each priority as one of their top three areas of new IT spending:
|2016 rank||Priority in ANZ||ANZ percentage||Global ranking|
|1||Business intelligence/analytics||43 per cent||1|
|2||Cloud||33 per cent||2|
|3 =||Digitalisation/digital marketing||24 per cent||5|
|3 =||Mobile||24 per cent||6|
|4||ERP||17 per cent||4|
|5||Legacy modernisation||16 per cent||9|
|6 =||Infrastructure and datacentre||13 per cent||2|
|6 =||CRM||13 per cent||11|
|7||Networking||12 per cent||8|
|8||Industry-specific applications||9 per cent||10|
|9||Security||7 per cent||7|