According to Gartner, the world’s leading information technology researchers, in their latest spending forecast, investment in data centres is predicted to reach $175bn in 2016, a 2.1% increase from 2015. Global enterprise software spending is on pace to total $321bn, a 4.2% increase from 2015. Spending on IT services is expected to reach $921bn, a 2.1% rise from 2015.
However beneath these statistical averages of growth are significant changes to IT spending that need to be taken into consideration. Gartner research vice-president John-David Lovelock said: “There is a shift from growth to cost optimisation.”
“No one has revenue growth to transform to a digital business. CIOs must now optimise IT and business to fund spending on digital projects,” said Lovelock. As an example, he said the savings from legacy system optimisation and enhancements can be redirected to fund digital initiatives.
Cost optimisation is the theme of the times with the shaky business environment and states all over the world still struggling with growth. Now isn’t the time for new investment in huge new IT projects. However, IT investment cannot be neglected otherwise companies risk becoming outdated in a matter of years.
Lovelock recommended a solution to this dilemma: “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 the same level of activity has a very different annual spend.”
Businesses need move away from being reliant on in-house technology systems when IT isn’t their primary interest. Vast data centres and Big Data analytics are vital to becoming the successful modern business but, as IT can become outdated in a matter of years and business needs to be at the top of the game to stay ahead in the market; the only viable solution is to spend money on specialised services rather than hardware.
Key areas where spending on services are a more economical way of providing IT services are: data driven cost control consultants, cloud services and data centres.
As the digital business model begins to become the only viable option for a successful enterprise moving from purchasing IT to purchasing services is going to become the most efficient way forward.
Getting visibility of your current IT spend (including shadow spend) is the first step in determining what costs can be reduced. Find out more on our piece about Shadow IT Spend.