News Stay informed about the latest enterprise technology news and product updates.

Gartner cuts 2017 IT spending forecast, sees shift to 'digital business'

As companies embrace their digital future, the shift in IT spending to software plows on.

The good times haven't started rolling, at least in terms of IT spending. The rising U.S. dollar, coupled with...

more enterprises moving to the cloud, has led market research outfit Gartner Inc. this week to revise its global IT spending forecast for 2017. Worldwide IT spending is now expected to reach $3.5 trillion U.S. dollars -- a modest 1.4% increase over last year -- according to data released Monday. Just last quarter, Gartner was predicting a 2.7% increase.

"The strong U.S. dollar has cut $67 billion out of our 2017 IT spending forecast," John-David Lovelock, research vice president in Gartner's technology and service provider research group, said in a statement about the revised forecast.

But technology strategies also play into the forecast. As enterprises move inexorably into the cloud, spending on IT hardware continues to take a beating. Gartner predicts the data center system segment to grow a mere 0.3% in 2017.

"In the server world, traditional brand servers like HP, Dell and Lenovo are selling to enterprises, although enterprises need fewer servers because of the cloud," Lovelock said in a phone conversation. "Platform-as-a-service and infrastructure-as-a-service offerings are changing the dynamics ... which means cloud service providers like Amazon, Google and Microsoft are taking more of the server markets themselves."

Indeed, Gartner expects a 5.5% growth in enterprise software spending, increasing to $351 billion for the year. The worldwide IT services market is projected to grow 2.3% in 2017, above the overall spending forecast but less than the 3.6% increase in 2016.

According to Lovelock, the cloud continues to influence the entire breadth of IT spending.

"We are seeing shifts in software from the traditional licensed, subscription and open source world toward software as a service (SaaS) and that's changing the way that companies buy technology," Lovelock said.

The push toward digital business

The overriding trend behind the tepid 2017 IT sales predictions is the shift away from the "Nexus of Forces" -- Gartner's term for the combination of social, mobile, information and cloud technologies -- to the era of digital business characterized by people, business and things working together, Lovelock told SearchCIO.

CIOs have to ensure that they are operating in a cloud-first environment and they have to be looking for new KPIs that are going to allow them to gauge their success in a digital business world versus a traditional business world.
John-David Lovelockresearch vice president, Gartner

Mature economies like North America, Europe, Australia and parts of Latin America are already witnessing this trend, he added.

The shift in focus from implementing digital technologies to figuring out how to use those technologies to optimize how people work resonates with Isaac Sacolick, principal at consulting firm StarCIO and a former CIO. He believes digital transformation begins with focusing on customer experiences and providing new ways to integrate a customer's physical and digital worlds.

"The execution is entirely based on a CIO taking that charter and coming up with new practices, new technologies and new ways of working with the business to enable that digital strategy and execute on it, and then ultimately deliver results from it," said Sacolick, who was a CIO at Greenwich Associates, McGraw Hill Construction and BusinessWeek.

But businesses should expect to face challenges as they embark on their digital transformation journey, Lovelock warned. Being able to establish a solid cloud strategy, being able to work effectively in a hybrid cloud environment and operate bimodal IT are some of the biggest challenges that CIOs could face along the way, he said.

"CIOs have to ensure that they are operating in a cloud-first environment and they have to be looking for new KPIs that are going to allow them to gauge their success in a digital business world versus a traditional business world," he added.

Make way for autonomous IT

So what does the IT spending forecast mean for CIOs? In Gartner's view, it means doing a lot with a little.

"The 1.4% projected growth in IT spending this year means CIOs have got a lot more to do, but they are not getting a lot more money to do it," Lovelock said.

Connecting the dots between digital transformation and IT spending is far from an exact science, but there is research suggesting that the flat IT forecasts mask some of the robust technology investments being made at companies where digital transformation is full steam ahead. That's the view of Andrew Horne, IT practice leader at consultancy CEB (which was recently acquired by Gartner for $2.6 billion).

"Today, the digitization of products, services and channels means that technology spending is closely related to specific business strategies and therefore differs across companies based on where they are on their digitization journey," Horne wrote in a recent column he did for SearchCIO on trends in IT spending.

Sacolick agreed with both views. CIOs are increasingly expected to do more and those that do will be given a "justified" budget to enable digital transformation, he said, with this caveat: "At the end of the day they need to be leaving the enterprise not only with the ability to grow and enable new customer experiences, but they've got to do it in a way that's going to end up with a less expensive IT footprint."

The way that CIOs are going to achieve this is by utilizing the cloud, SaaS and more nimble enterprise services that are better interconnected, he said -- a strategy well underway judging from the relatively robust IT spending on cloud.

To ensure CIOs are spending their IT budgets effectively, Lovelock suggested they craft a three- to five-year plan to help their transition into a cloud-first digital business operation.

"CIOs have to look at where their budget is going in the way of capital expenditures versus operating expenses, when do they buy things versus when do they lease or get them as a service," Lovelock said. "They also have to make sure they have the right staff in the right place."

And there are bigger shifts to come. Lovelock sees organizations shifting to autonomous businesses in the future, "where there is enough intelligence built into IT systems to carry out business without human intervention." He expects CIOs to lead the charge when this transition from digital business to autonomy occurs.

"CIOs have to get that partnership between the business and IT going in order to ... build a foundation today that's going to allow them to exploit autonomous business by 2025," he said.

You've got your marching orders; it's not too early to start preparing for obsolescence.

CIO news roundup for week of April 10

The news of Gartner revising its worldwide IT spending forecast hit the stands this week; here's what else made news:

Tesla most valuable U.S. automaker. Tesla this week passed auto industry giants General Motors and Ford to become the U.S. carmaker with the largest market capitalization. The luxury carmaker's market value rose to $50.887 billion, exceeding GM's by about $1 million. Over the past month, Tesla has surged 35% as investors bet that CEO Elon Musk will continue to revolutionize the automobile industry with software and other technology, Fortune reported. GM's stock is down nearly 20% since 2013, and the company has scaled back operations outside the U.S. while trying to improve profitability. This week, GM announced it was hiring an additional 1,100 people to work on its self-driving car projects at its Calif. research facility. In more Musk news, the entrepreneur made waves when he took a dig at Ford this week on Twitter, responding to a group of investors calling for Tesla's board to add two new directors by writing, "This investor group should buy Ford stock. Their governance is amazing."

Synack announces $21 million strategic investment. Cybersecurity startup Synack announced Tuesday it raised $21.25 million in a Series C round of funding from investors that included Microsoft Ventures and Hewlett Packard. Synack manages a remote network of hackers for hire that perform controlled operations to discover and report weaknesses in Synack client's digital defenses. Co-founder and CEO Jay Kaplan said that investment from industry leaders, such as Microsoft Ventures and HPE, highlights their cybersecurity priorities. "We have a shared vision for the future of cybersecurity and see a huge opportunity for alignment in platform development and scaling channels to market," Kaplan said in a statement. This week's financing announcement brings Synack's total funding to over $55 million.

Qualcomm countersues Apple. Qualcomm Inc. has filed its Answer and Counterclaims to a January lawsuit brought by Apple against the company. Among the Qualcomm's main complaints are claims that Apple deliberately didn't realize the full potential of Qualcomm chips when they were used in iPhone 7 phones so they wouldn't perform better than the modems provided by Intel. In the filing, Qualcomm's details "Apple's failure to engage in good faith negotiations for a license to Qualcomm's 3G and 4G standard essential patents on fair, reasonable and non-discriminatory terms," according to a press release. Apple's original suit against Qualcomm was filed in January, and claimed $1 billion from Qualcomm after it argued that the chipmaker overcharged for the use of patents. Apple followed that suit with additional ones against Qualcomm this year that also focused on patents and designs.

Senior Site Editor Ben Cole contributed to this week's news roundup.

Next Steps

Check out our previous Searchlight roundups on the rollback of FCC privacy rules, IBM InterConnect and Intel buying Mobileye.

Dig Deeper on IT spending and budgeting

Join the conversation

1 comment

Send me notifications when other members comment.

Please create a username to comment.

Tell us what you think about Gartner's IT spending forecast for 2017.