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Digital Business Will Increase IT Spending in 2017

 
 
By Mike Vizard  |  Posted 2016-12-27
 
 
 
2017 IT Budgets

Investments in IT have clearly been a major driver of the modern economy. But as solution providers gear up for 2017, the biggest opportunity is not going to be centered around any one technology as much as it will focus on turning visions of digital business transformations into reality.

Most organizations have historically employed IT to lower costs by turning paper-based processes into digital ones that are less expensive to complete. But instead of merely replicating those processes in a digital format, businesses are now keenly interested in driving new sources of revenue by using new digital processes made possible by advances in technologies such as natural language interfaces and machine learning algorithms.

"Business and IT are working together to create an innovation agenda," said Matt Joe, ‎global innovation lead and chief technology innovation officer in North America for Avanade, a joint venture between Accenture and Microsoft that focuses on solutions based on Microsoft technologies. "We've gotten past the technology conversation."

As part of that agenda, Joe said, businesses are open to creating all kinds of digital experiences using everything from new ways to visualize data to augmented reality applications.

In fact, Forrester Research said that in 2017, budgets specifically allocated for digital transformation will top the billion-dollar mark. To an industry that generates multiple trillions of dollars in revenue, that might not seem like much. But those digital business transformation projects are driving net new investments in everything from mobile applications and advanced analytics to infrastructure-as-a-service and IT security.

Neeracha Taychakhoonavudh, senior vice president for partner programs and enablement at Salesforce, said the provider of cloud application services is having a challenging time keeping up with the pace of demand. "We need to increase the number of people certified on our solution by 50 percent in 2017," she said.

Salesforce, notes Taychakhoonavudh, is looking to increase the number of partners it has by 18 to 20 percent. To increase its market reach even further, Salesforce hopes its existing partners will hire more talent. To accelerate that process, the company has set up the Salesforce Ignite program to train IT solution provider personnel on how to employ Salesforce technologies. It also created a venture capital arm that invests in solution providers that want to expand their Salesforce practices.

Digital Transformation Impacts Tech Budgets

Jason Hayman, market research manager for TEKsystems, an IT solutions provider, said that all this interest in digital transformation is helping to increase the total amount of spending, while starting to narrow the historic divide between IT and the business. In all, a recent IT spending survey of more than 700 IT leaders conducted by TEKsystems finds that 49 percent expect their IT budgets to grow in 2017. That's a three-year high for this study.

"Digital transformation is well under way," said Hayman. 'There's a lot more confidence in IT."

Pat Sullivan, global Oracle technology lead at Accenture, adds that the amount of data new applications are generating is driving customers toward cloud services, which are capable of handling it in a way that makes building, deploying and maintaining these applications simpler.

"Data volumes are driving organizations into the cloud," said Sullivan. "IT organizations have a tough time stitching all the technologies together on their own."

Perhaps most significant of all from the perspective of solution providers is that as these investments in digital business processes increase, the relationship between solution providers and customers also starts to change. CP Gurnami, managing director and CEO of Tech Mahindra, said the IT solution provider is increasingly either delivering entirely new business processes on behalf of customers or simply taking over existing ones in their entirety.

Thanks to the rise of the cloud, Gurnami said that it's more feasible than ever to outsource a digital business process, which provides the customer with the added benefit of reducing their own upfront investment in what is often an unproven use case. In effect, he added, customers are not as interested in the technologies employed as they are in the ultimate business outcome enabled by much more agile IT solutions delivered via the cloud, which are treated as an operating rather than capital expense.

"It's now only a matter of time before everything moves into the cloud," Gurnami predicted.

Of course, not every company is moving down the path to digital business transformation at the same rate. Arguably, most of them don't have a conscious digital business strategy at all. Instead, as they invest in mobile applications and advanced analytics, they gradually discover their digital business potential. However, once discovered, many of them dramatically increase their level of investments to cut costs and drive new streams of revenue.

The challenge facing solution providers going into 2017 is making sure they find a way to stay relevant. Barring a massive recession usage of almost every class of technology, tech budgets should increase in 2017. What will be different is how those technologies are delivered.

There will still be plenty of investments in technologies delivered via a local data center in 2017. But it should be apparent to all by now that the rise of digital business transformation will accelerate adoption of cloud services in 2017 at a much faster rate than we've seen previously.