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As the Race to Digitize Continues, IT investment is Exploding

David GOLUB
David GOLUB
VP, Customer Experience

As pressure to “digitize or die” continues to drive corporate decision making, IT investment has risen to the top of the priority list, with leaders spending big to drive growth.

For 2021, total global IT spending is expected to break to a high of at least $4.1 trillion, with tech investment increasing in every country and every market sector, according to Gartner’s Q2 update to its market databook, released earlier this week.

At Pentalog, we predicted this trend at the start of the COVID-19 crisis, arguing that smart IT investment would lead the way to post-recession growth. Our analysis drew on the prescient work of Walter Frick who explained how investment during a downturn – in particular, spending to improve technology and business processes – generates faster growth when the recovery comes around.

We also saw the boom comingin Google Trends data, with searches for keywords such as “digital transformation,” “data engineer” and “hire developers” hitting all-time highs in recent weeks.

IT Spending - Digital Transformation

According to Gartner, global IT investment will pass a mind-boggling $4 trillion in 2021.

But now that economies are shaking off the pandemic blues, it’s not just the size of the global investment that’s catching attention, it’s the focus.

According to Gartner, in the wake of the lockdown, IT spending has moved to the heart of commercial strategy. “Technology’s primary job is no longer enabling the business, technology’s primary job is driving topline revenue growth,” comments Gartner analyst Mark McDonald.

In other words, as the advisory company explains, if 2020 was a year of rapid-fire innovation to navigate massive disruption, (what Gartner calls “a race to complete digital business journeys”) 2021 is looking like a blockbuster sequel.

 

In pursuit of the new normal

In a race to meet customers where they are, nearly all companies are caught up in a pandemic-induced digital adaptation frenzy.  But market winners are leveraging faster time-to-market and agile business processes to outpace rivals.

As companies advance their transformation journeys, they navigate what Gartner identifies as the 4 phases of pandemic response, a flow from crisis to evolution to opportunity. Our CEO Frederic Lasnier recently outlined a similar hypergrowth recovery cycle.

“As for business investment, it will be conditioned by two simultaneous and brutal needs: digital acceleration of course, but also the environmental revolution,” he wrote.

But work remains to be done.  While a relative handful have achieved full implementation, Gartner advised that a whopping 77% are still in pursuit of their “new normal.” 

Covid response - digital transformation

According to Gartner, the race is on to seize opportunity, and IT investment is the oxygen.

To put it another way, as economies recover and market players adapt around new landscapes, CEOs are prioritizing IT investment as a topline strategic mandate for survival and telling their CIOs to get it done now.

Where is the growth taking place in the IT sector? According to Gartner, almost everywhere.

For example, as the table below explains, application implementation and managed services are in the 7.5% range for growth, enterprise application and infrastructure software around above 10%, with strong growth in hardware driven by work-from-home.

Which is not to forget the astonishing growth of infrastructure as a service over the past year, as the whole world seemed to migrate to the cloud, we see a data point almost literally “off the chart.” We also foresaw this massive adoption of cloud in our 2021 tech trends forecast

IT market growth

Gartner predicts strong to exceptional growth in nearly every sector of the IT market.

To summarize where things are headed, companies that are looking to grow revenue expectations are looking at IT to do it.

In the words of Gartner’s Chief Forecaster John Lovelock, IT has emerged as the favored child in the C-suite: “CEOs want IT at the heart of business value generation…that changes where money comes from, it changes where money is being spent.” 
 

It’s not just the input but the outcome

Within this massive technology investment, Gartner also identifies a key trend toward greater levels of co-creation between companies and their IT service providers. This shift is driven in large part by a shift away from product features and toward business outcomes.

In other words, with a heavy focus on integration of core technology capabilities such as robotic processes, API management and nonrelational databases (among others) companies are looking to providers less for out-of-the-box solutions and more as partners whose underlying knowledge and capabilities can help drive growth.

Gartner coins the term “generative provider” to explain this phenomenon, which analysts describe as “a business model evolution in response to the elevated expectations of companies that place higher value on information and technology.”

To contrast the notion with customary models, generative relationships move beyond “market-based products and services” by proposing tighter collaborations around high-value outcomes with partnership models adapted for technology intensive companies.

The advantages of generative relationships, according to Gartner, is that they allow companies to work with providers to build something together which neither could have created on their own. And, interestingly, such relationships represent the fastest growing segment of a fast-growing market.

We’ll take a closer look at this topic in the future.

 

Also read:

Google Search Data Suggests Digital Transformation Is Still Hot 

After Covid – Hypergrowth… 

Why Smart IT Investment Leads the Way to Post-Recession Growth 


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