IT leaders get the green light to spend on digitisation

Worldwide IT spending is projected to hit $4.1tn in 2021 – an increase of 8.4% from 2020, according to the latest forecast by Gartner.

The source of funds for new digital business initiatives will come more frequently from business departments outside IT and will be charged as a cost of revenue or cost of goods sold (COGS), says the analyst.

“IT no longer just supports corporate operations as it traditionally has, but is fully participating in business value delivery,” said John-David Lovelock, distinguished research vice-president at Gartner. “Not only does this shift IT from a back-office role to the front of business, but it also changes the source of funding from an overhead expense that is maintained, monitored and sometimes cut, to the thing that drives revenue.”

The forecast shows that the highest growth will come from devices (14%) and enterprise software (10.8%) as organisations shift their focus to providing a more comfortable, innovative and productive environment for their workforce. 

Although optimisation and cost-saving efforts will not disappear simply because there is more economic certainty in 2021, Gartner predicted that organisations will continue to be pressurised to reduce costs. However, it said the focus for CIOs for the rest of this year will be to complete digital business plans that are aimed at enhancing, extending and transforming their company’s value proposition. 

“Last year, IT spending took the form of a ‘knee-jerk’ reaction to enable a remote workforce in a matter of weeks,” said Lovelock. “As hybrid work takes hold, CIOs will focus on spending that enables innovation, not just task completion.” 

Gartner’s e-guide Top priorities for IT leadership vision describes the role of the CIO changing post-Covid to become more of a chief operating officer responsible for the digitisation of business processes. 

The guide’s authors said CIOs have been given a clear mandate to use technology to accelerate the enterprise towards its business goals. The 2021 Gartner CIO survey reported that 76% of CIOs said demand for new digital products and services increased in 2020 and 83% said it would increase in 2021.

The top technology that Gartner sees CIOs and IT leaders investing in during the coming year is digital workplace technologies to support working from home. Next come artificial intelligence, machine learning, robotic process automation, distributed cloud and multi-experience platforms. Gartner said these emerging technologies enable businesses to automate processes and decisions, enabling a faster pace and scalable digital.

According to the Gartner board of directors survey, 69% of boards have responded to Covid-19 with digital business acceleration, while 60% have chosen to improve operational excellence through digital business. But the guide’s authors warned CIOs that steady digitisation progress is no longer sufficient – boards have asked their CIOs to focus on acceleration.

However, many IT departments are struggling with IT integration, leaving holes in customer experience and gaps in business processes.

The MuleSoft 2021 connectivity benchmark report, in collaboration with Vanson Bourne and Deloitte Digital, found that although application programming interface (API) use has grown, the reuse of code, APIs and best-practice templates has plateaued over the last two years.

Based on interviews with 800 IT leaders across the globe, the study reported that, on average, 42% of such internal IT assets and components are available for reuse. This leaves 58% of IT components not available for reuse, which, according to MuleSoft, remains a massive area of opportunity. At a time when IT departments are stretched, developers and the broader organisation must have easy access and the ability to reuse integration assets. 

The study found that only 29% of applications, on average, are integrated, up slightly from 28% in 2020. With the average lifetime of an application being just four years, the report’s authors urged IT leaders to encourage their businesses to evolve away from being hierarchical and hardwired towards being flexible and open to change. This is sometimes referred to as a “composable enterprise”. 

MuleSoft also found that almost nine in 10 respondents pointed to integration challenges as a blocker to delivering on digital transformation. If this trend continues, it risks stalling key business initiatives for many organisations. Integration will continue to be a major area of focus as organisations look to connect and derive more value from their new and existing apps and data.

Among the interesting findings in the MuleSoft report is that IT teams are spending more than one-third of their time on integration projects, and custom integrations are costing large enterprises an average of $3.5m each in annual labour. If Gartner’s assertions on the growth opportunity for CIOs is correct, as organisations strive to become more digital, they will have to face the fact that IT systems need to be joined up, and they will need to invest both time and budgets to make this work.

Ian Fairclough, vice-president, EMEA at MuleSoft, said: “Organisations’ integration efforts should centre around creating reusable assets rather than point-to-point integrations. It’s a no-brainer for saving IT time and money, and increasing operational efficiency and time-to-value for digital innovation projects.”