Photo - John-David Lovelock, Research Vice President at Gartner
Despite a global dip in IT spending of 0.5 percent in 2016 due mainly to currency fluctuations, Malaysia's IT spend will increase 7.8 percent on last year to reach RM68.9 (U$17.75) billion in 2016, according to analyst firm Gartner's latest forecasts.
John-David Lovelock, Gartner research vice president, said worldwide IT spending is forecast to total US$3.49 trillion in 2016, a decline of 0.5 percent over 2015 spending of $3.5 trillion. This is down from last quarter's forecast of 0.5 percent growth.
"There is an undercurrent of economic uncertainty that is driving organisations to tighten their belts, and IT spending is one of the casualties," said Lovelock.
"At the same time, the need to invest in IT to support digital business is more urgent than ever," he said. "Business leaders know that they need to become digital businesses or face irrelevance in a digital world."
"To make that happen, leaders are engaging in tough cost optimisation efforts in some areas to fund digital business in others," Lovelock said.
"As an example, the savings from legacy system optimisation and enhancements are being redirected to fund digital initiatives. It's about doing more with the same funds," he said.
(Below) Table 1: Malaysia IT Spending Forecast (Billions of Ringgit)
Digital business initiatives
"Typically, less than 10 percent of organisations are in cost optimisation or cost cutting mode," added Lovelock. "However, the need to spend on digital business initiatives in a time when revenue growth does not support runaway IT budgets is forcing more organisations to optimize as a first step. Business processes, as well as IT, are undergoing optimisation - digital business requires both."
"However, many CIOs are reluctant to raise this possibility, given the cultural and political barriers to optimising business costs," he said.
Lovelock said that the most evident results of these optimisation efforts were in the switches in spending between assets and services. "Most traditional IT now has a 'digital service twin' - license software has cloud software, servers have Infrastructure as a Service, and cellular voice has VoLTE."
"Things that once had to be purchased as an asset can now be delivered as a service," he said. "Most digital service twin offerings change the spending pattern from a large upfront payment to a smaller reoccurring monthly amount. This means that the same level of activity has a very different annual spend."
The Gartner Worldwide IT Spending Forecast is an indicator of major technology trends across the hardware, software, IT services and telecom markets.
Top level global forecasts
Gartner expects the global device market (PCs, ultramobiles, mobile phones, tablets and printers) to decline 3.7 percent in 2016.
Sign up for CIO Asia eNewsletters.