Gartner predicts increase in IT spending despite economy — highlights new trends

Gartner will discuss this and other IT trends with CIOs and other IT executives at its Gartner IT Symposium/Xpo 2022 being held this week.

“Enterprise IT spending is recession-proof as CEOs and CFOs, rather than cutting IT budgets, are increasing spending on digital business initiatives,” said John-David Lovelock, distinguished VP analyst at Gartner.

Focus on software, de-emphasize devices

Economic turbulence changes the context for technology investments, Lovelock explained — increasing spending in some areas while accelerating declines in others. However, it is not projected to materially impact the overall level of enterprise technology spending.

Gartner’s latest research predicts that: 

• Software spending will grow by 11.3%
• IT services spending will grow by 7.9%
• Data center systems will grow by 3.4%
• Communication services will grow by 2.4%

By contrast, device spending will decrease by .6%. 

There is sufficient spending within data center markets to maintain existing on-premises data centers, the firm says, but new spending continues to shift to cloud options. 

Companies will use digital technology to reshape revenue streams, add new products and services, change the cash flow of existing products and services as well as change value propositions for existing products and services, Gartner claims. 

“This trend has fed the shift from buying technology to building, composing and assembling technology to meet specific business drivers,” Lovelock said. 

It is also foundational to the growth of cloud over on-premises for new IT spending, he said. Back-office and operational needs in other departments are also being added to digital transformation project lists. 

Digital transformation goals not yet realized

Today, Gartner also released the findings of a survey of boards of directors, gauging their digital mindsets and trends within their organizations. 

Interestingly, CEOs are considered the primary leader responsible for driving digital business initiatives (28%). This is ahead of the CTO (19%) and CIO (14%). 

“Historically, boards have looked to IT to lead digital business,” said Partha Iyengar, distinguished VP analyst at Gartner.

However, considering the macro and strategic benefits that boards are expecting from digital business, CEOs are now held directly accountable for that, as well as for enterprise revenue or growth, said Iyengar. 

Also, per the survey of 281 respondents in North America, Latin America, Europe and Asia/Pacific, 89% of board directors say that digital business is now embedded in all business growth strategies. However, just 35% report that they have achieved or are on track to achieving digital transformation goals. 

“Boards of directors (BoDs) have reached a point where digital business strategy and overall business strategy are one and the same,” said Jorge Lopez, distinguished VP analyst at Gartner. 

While CIOs have made significant progress leveraging technology, it is not yet enough to realize the strategic business benefits that directors expect, said Lopez. The most “future-savvy” boards are seeking opportunities in upheavals and risks.

“CEOs and CIOs will need to adopt this mindset as technology plays an ever-expanding role in driving business success,” Lopez said. 

AI/ML to drive digital business success

Meanwhile, boards are looking to invest in “breakthrough” technologies that will drive digital business and enterprise success:

• 40% consider artificial intelligence (AI) and machine learning (ML) technologies imperative to digital business success
• 30% consider software enhancement imperative
• 28% consider data and analytics imperative
• 22% consider cloud imperative

By contrast, respondents cited digital twins (2%) and autonomous technologies (2%) as the least likely to drive success. 

Ultimately, boards are looking to modernize and enhance “bedrock” such as enterprise resource planning (ERP) and customer relationship management (CRM) tools, Gartner explained. 

“In practice they are often complex and rigid,” said Lopez, “when enterprises need agility and change.”

Risk-taking is also critical for digital acceleration — and boards are willing to increase their risk appetite. Per the survey, 64% of board directors intend to do so through 2024, an increase of 7% from the previous year. 

“Boards recognize that decision-making in a turbulent business environment requires a higher level of risk,” said Lopez. “This risk-taking ability is critical to competing at the speed of innovation.”

Similarly, many boards of directors are expanding their vision to focus on a “digital economic architecture.” This is the approach that non-digital enterprises use to achieve the economic benefits — growth, profitability, market cap and brand value — that digital giants have achieved through “born digital” business models. 

According to the survey, 71% of directors are pursuing or plan to pursue that type of economic structure. 

Understandably, this requires a significant change in mindset, said Iyengar. “Boards must recognize and leverage new sources of production and value,” he said, “which requires a greater ability to accept, and even embrace, risk.” 

Originally appeared on: TheSpuzz