Tuesday, 07 October 2014 17:07

The ‘digital industrial economy’ drives IT spending to $4 trillion Featured

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Worldwide IT spending is projected to surpass US$3.9 trillion in 2015, says leading IT consultancy Gartner.

This is a 3.9% increase from 2014. Much of the spending will be driven by what Gartner calls the ‘digital industrial economy’. Gartner defines digital business as new business designs that blend the virtual world and the physical worlds, changing how processes and industries work through the Internet of Things (IoT).

Gartner says the impact that the digital business economy is having on the IT industry is dramatic. Since 2013, 650 million new physical objects have come online. 3D printers have become a billion dollar market; 10% of automobiles became connected; and the number of chief data officer and chief digital officer positions have doubled.

In 2015, all of these things will double again.

Peter Sondergaard, senior vice president at Gartner and global head of research, told an audience of more than 8,500 CIOs and IT leaders at Gartner’s Symposium in the US that there are seismic forces at work, creating permanent, structural changes.

This year enterprises will spend over US$40 billion designing, implementing and operating the Internet of Things,” Sondergaard said. “Every piece of equipment, anything of value, will have embedded sensors. This means leading asset-intensive enterprises will have over half a million IP addressable objects in 2020.”

There is a dramatic shift in IT spending power, said Sondergaard. There is a shift of demand and control away from IT and toward digital business units closer to the customer.

“38% of total IT spend is outside of IT already, with a disproportionate amount in digital. By 2017, it will be over 50%,” Sondergaard said. “Digital startups sit inside your own organisation, in your marketing department, in HR, in logistics and in sales. Your business units are acting as technology startups.”

Gartner estimates that half of all technology sales people are actively selling direct to business units, not IT departments. “Millions of sales people and hundreds of thousands of resellers and channel partners are looking for new money flows in the fluid digital world, and they are finding eager buyers.”

Sondergaard spoke of ‘bimodal IT’, which fills the digital divide between what IT provides and what the enterprise really needs. “Mode 1 is traditional, and the systems that support them must be reliable, predictable, and safe, like a great IT organisation). Mode 2 is nonsequential, emphasising agility and speed, like a startup because disruption can occur at any time.”

He used the example of smart machines to highlight the disruption caused in digital business. Smart machines are an emerging ‘super class’ of technologies that perform a wide variety of work, of both the physical and the intellectual kind. For example, school computers have been grading multiple tests for many year, and now they are grading essays, unstructured tests that require analysis.

“Not only is the grading more accurate, but students actually work harder on their essays when they are graded by a smart machine,” Sondergaard said. “Other professional tasks won’t be far behind: financial analysts, medical diagnostics, and data analytics jobs will be impacted. Knowledge work will be automated.

“Smart robots will appear not just on the manufacturing floor, where they do physical work, but in the workplace and even in the home. Smart machines will automate decision making. Therefore, they will not only affect jobs based on physical labour, but they will also impact jobs based on complex knowledge worker tasks.

“Digital businesses will impact jobs in different ways. By 2018, digital businesses will require 50% fewer business process workers. However, by 2018 digital business will drive a 500% boost in digital jobs.”

Sondergaard said the hottest skills CIOs must hire or outsource for are: mobile, user experience and data sciences. Three years from now, the hottest skills will be in smart machines, including the Internet of Things, robotics and automated judgment and ethics.

“Over the next seven years, there will be a surge in new specialised jobs. The top jobs for digital will be integration specialists, digital business architects, regulatory analysts and risk professionals

Sondergaard explained to the CIOs in the audience, “The new digital startups in your business units are thirsting for data analysts, software developers and cloud vendor management staff, and they are often hiring them fast than IT. They may be experimenting with smart machines, seeking technology expertise IT often doesn't have.

“You must build talent for the digital organisation of 2020 now. Not just the digital technology organisation, but the whole enterprise. Talent is the key to digital leadership. Build credibility and build the two-speed organisation.”

The Gartner Symposium comes to Australia on 17-20 November.


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Graeme Philipson

Graeme Philipson is senior associate editor at iTWire. He is one of Australia’s longest serving and most experienced IT journalists. He is author of the only definitive history of the Australian IT industry, ‘A Vision Splendid: The History of Australian Computing.’

He has been in the high tech industry for more than 30 years, most of that time as a market researcher, analyst and journalist. He was founding editor of MIS magazine, and is a former editor of Computerworld Australia. He was a research director for Gartner Asia Pacific and research manager for the Yankee Group Australia. He was a long time weekly IT columnist in The Age and The Sydney Morning Herald, and is a recipient of the Kester Award for lifetime achievement in IT journalism.

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