Don’t let economic uncertainty slow DX efforts

We talk to Gartner analyst John-David Lovelock about the latest IT spending forecast, and why the discussion is changing from one about number-crunching to one about digital disruption.

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Dealing with digital transformation (DX) in uncertain economic and political times can be challenging, to say the least.

And the latest forecast from Gartner shows that everything from indecision around the pending trade deal to replace the North American Free Trade Agreement (NAFTA) to uncertainty around trade wars and the oil industry are slowing growth in IT spending.

But it’s not all doom and gloom — in part, because the traditional IT model is less relevant in today’s on-demand world. But it also means if you’ve been slow on the uptake with DX, now is the time to get moving.

IT spending

“The worst thing in the world for IT spending is uncertainty,” John-David Lovelock, research vice-president at Gartner, told expertIP. Companies spend when times are good; they typically spend when times are bad. But, “companies don’t spend when times are uncertain.”

That uncertainty will, however, eventually resolve itself. If NAFTA is signed this year, we’ll start moving ahead under the new rules, said Lovelock. If it doesn’t get signed, we’ll start moving ahead under the old rules. Business will continue.

In the meantime, though, what does that mean for your DX efforts?

If this uncertainty results in an economic downturn, companies caught mid-way through a digital transformation will be most exposed, particularly if they’re still relying on traditional business models. “They won’t have that grace period and may not have the cash to complete their digital transformation,” said Lovelock.

“The No. 1 thing you can do for downturn preparation is complete what you’re doing in terms of digital transformation,” he advised. Those who do will likely have a ‘last man standing’ advantage coming out of any potential downturn.

Cloud shift

Although Canadian organizations are not as far along in their digital journey as their global counterparts, their use of cloud services is second only to the U.S., and Gartner is seeing increased investment in off-premises capabilities.

Gartner refers to this as cloud shift, as growth in enterprise IT spending for cloud-based offerings will be faster than growth in traditional IT offerings through 2022.

Canadian IT spending is projected to reach US$87.8 billion this year, an increase of 1.1 per cent year over year, according to Gartner. Global IT spending is also forecast to grow 1.1 per cent in 2019, reaching US$3.79 trillion.

Lovelock is the first to admit that people don’t get excited by numbers such as 1.1 per cent. But there’s increasing recognition that judging growth by dollars spent is becoming more nebulous (consider how much is spent annually on a monthly software subscription versus the deployment of on-premise IT infrastructure).

“So this is less about IT spending growth than about IT spending switching,” said Lovelock.

This is the first time in history where a technology revolution is being paid for by savings from the old way of doing things, he said. During the mobile revolution, we added mobile phones — but didn’t get rid of desktop PCs. “But this is the first time we can shed things; we’re shedding servers, storage, networking equipment.”

Disruptive technologies

Disruptive emerging technologies, such as AI, will “reshape business models as well as the economics of public- and private-sector enterprises,” according to Gartner’s forecast. Investment in AI, for example, has experienced a huge jump from 2018, and the research firm predicts AI will have a major effect on future IT spending.

But currently AI is being used to augment decision making, not to make decisions. “Unfortunately most of the companies are using it as a cost-optimizing tool or productivity-enhancement tool,” said Lovelock.

Instead, they should be looking at what AI can make possible that wasn’t possible before because of time, cost or scale — such as a new line of business or new revenue stream.

Despite this, companies are starting to invest in the future, and they’re starting to look at business differently. “We’ve moved from IT as the foundation of the business to IT being the business,” said Lovelock.

And those who continue to digitally transform their business and take advantage of disruptive emerging technologies will be best positioned to weather these uncertain times.

Image: Eoneren/iStock

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