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New influencers of IT emerge as tech spending moves away from CIO

James Henderson | March 28, 2017
Technology purchases from line of business budgets forecast to grow faster than purchases funded by the IT organisation.

Technology spending funded by non-IT business units will reach US$609 billion in 2017, as new influencers of IT emerge across the enterprise.

Representing an increase of 5.9 per cent over 2016, IDC research findings point to a changing buying landscape for the channel, one which sees line of business (LOB) leaders gain greater control of the technology buying process.

In addition, IDC research forecasts LOB spending to achieve a compound annual growth rate (CAGR) of 5.9 per cent over the 2015-2020 forecast period while in comparison, technology spending by IT buyers is forecast to have a five-year CAGR of 2.3 per cent.

By 2020, IDC expects LOB technology spending to be nearly equal to that of the IT organisation.

“Companies' adaptation of innovation accelerators, such as Internet of Things, cognitive/AI systems, and 3D printing, together with the four pillar technologies of the 3rd Platform, to both new product and service developments and day-to-day business operations has fundamentally increased LOB spending on IT,” IDC Senior Market Analyst, Naoko Iwamoto, said.

“The innovation accelerators have put the line of business units in the frontline of the digital transformation and have forced them to work either alone with the ecosystem outside of the IT organisation as 'shadow IT' or in closer collaboration with the IT department than ever before.”

As explained by Iwamoto, IDC's LOB taxonomy identifies two major types of technology spending - purchases funded by the IT organisation and purchases funded by technology buyers outside of IT.

Specifically, joint purchases can be funded by either IT or the functional business unit while "shadow IT" projects are funded from the functional area budget without the knowledge, involvement, or support of the IT department.

Although some technology categories are dominated by IT spending, most involve outlays from both IT and the business units.

For example, worldwide IT spending on servers, storage, and network equipment is forecast to total US$114.1 billion this year, while LOB spending on these items will total US$52.9 billion.

However, IT is not the primary source of funding for all hardware purchases. Business unit spending on PCs, monitors, mobile phones, printers, and tablets will total US$83.8 billion worldwide this year compared to US$76.2 billion spent by the IT department.

And LOB buyers will spend more on software applications in 2017 (US$150.7 billion) than IT buyers (US$64.7 billion).

According to Iwamoto, the technology categories that will see the most spending from LOB buyers in 2017 will be applications (US$150.7 billion), project-oriented services (US$120.3 billion), and outsourcing (US$70.3 billion).

The categories that will receive the most spending from IT buyers this year will be outsourcing (US$149.2 billion), project-oriented services (US$82.2 billion), and support and training (US$79.8 billion).

 

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