Gartner predicts a 6.8% increase in global IT spending in 2024, with the total value touching a whopping $5 trillion. The actual growth is, however, down from the previous quarter’s forecast of 8%. But the increase in spending follows a slower-than-expected 2023. The overall IT spending growth rate for 2023 was 3.3%, representing only a 0.3% increase from 2022.
What do these trends indicate? Is there a general rebound from the lacklustre yesteryears, or is the growth driven by any specific one-off event? Can individual businesses benefit from these growth trends? How can the CIO exploit these trends to drive business growth? Read on to find out.
Key findings of Gartner’s report
The growing popularity of IT services
The main highlight of the Gartner report is that IT spending will replace communication services as the top segment of IT spending in 2024. IT services will grow 8.7% in 2024 and reach $1.5 trillion in value, becoming the largest segment of IT spending for the first time.
IT services allow businesses to access specific technical tools and solutions. The scope of IT services is vast and includes cloud computing, database management, managed security, and so on. Enterprise IT sets up internal teams or outsources for enterprises to access these solutions.
Enterprises increase their IT spending to access the latest technology and expertise. They seek efficiency improvements and project optimisation in a competitive business environment.
Enterprises now prefer to avail services of providers rather than go through the hassles of doing it in-house. The crippling talent crunch in new technology forces such a decision, though. Skill development has not kept pace with tech advancement.
Developing in-house talent for the latest tech roles may either be too expensive or not possible at all.
Until last year, communication services remained the top segment of IT spending. This segment has plateaued now. Customers now buy to replace their devices, meaning the segment delivers only incremental growth.
The generative AI enigma
Contrary to what the popular buzz might indicate, Generative AI will not be budget breakers in the near future. The hype will not translate to investments and will not change the growth of IT spending in the near term. In its early days, the budget for generative AI will mirror the early-day budgets of yesterday’s big things, such as IoT and blockchain.
2024 will be a year of planning and strategising around Generative AI implementation though. Companies will determine how to best leverage this technology for maximum impact. The real spending surge for GenAI will likely come in the years ahead.
Change fatigue becomes a hurdle.
Traditional focus areas such as profitability and labour cost savings continue to drive cloud spending. But change fatigue threatens to cast a shadow.
The rapid pace of technological advancement overwhelms many stakeholders, especially the rank-and-file employees. The uncertainties lead to resistance to new initiatives. Workers demand lower risk and guaranteed outcomes from any proposed tech investments.
Change fatigue often manifests as change resistance. The fallout of resistance to change is CIOs hesitating to sign new contracts or commit to long-term initiatives. Without such moves, companies cannot make the next level of technology adoption.
Change fatigue among CIOs was the key reason for subdued growth in IT spending in 2023 and 2024. The key for businesses in 2024 will be balancing embracing innovation and managing the risks associated with change.
The changing role of CIOs
CIOs and other senior tech leaders must remain flexible to steer the enterprise through today’s dynamic environment.
The technology landscape continues to evolve. Changes in technology and customer preferences render established paradigms and business models obsolete. For instance, the wholesale adoption of the cloud forces a relook at security measures, data collection, and work processes.
CIOs have to change their priorities in tune with the changes in the external landscape. Rigidity in their roles is a sure-shot way to doom.
Industry 4.0 has unleashed digital penetration in a big way. Subsequently, the CIO’s role has changed. They are no longer mere IT infrastructure stewards. They have become pivotal strategists and leaders in digital innovation.
Agility and resilience are invaluable in today’s unpredictable business environment. Enterprises depend on CIOs to build flexible IT architectures that make their enterprises agile. The increasing popularity of IT services is a trend in this direction. Striking partnerships with external talent brings scalability to the mix. The CIO can ensure quick access to the needed resources and scale down just as fast.
One specific responsibility of the CIO in 2024 is to lead the charge against change fatigue and overcome resistance to change. AI, IoT, blockchain, and a whole lot of emerging technologies offer great promise.
Overcoming resistance to change is a critical barrier to successful change implementation. The onus is on the CIO to convince the rank-and-file about the need to change, promote change champions, and foster a culture that embraces digital change. They must demonstrate effective leadership skills and competence to convince the rank-and-file and earn their trust.
Another key priority of the CIO is building data-centric workflows and leveraging big data analytics. The CIO’s job is not limited to implementing the right tools and technologies for data analytics. They also need to ensure teams across the enterprise can understand and use data. A critical priority is ensuring customer-centricity in data-driven decision-making. This involves utilising data analytics to understand customer needs and preferences. Developing customer-focused technologies such as chatbots and omnichannel strategies depends on such data.
Onboarding the right tools
Change happens fast. Often, ERP and other enterprise systems cannot cope with the volume or velocity of change. Successful change management requires state-of-the-art tools that make implementing the changes easy.
Workday’s AI-enabled open and connected system allows businesses to navigate change seamlessly. These tools empower the workforce to deliver optimal performance.
A key USP of Workday is adaptive architecture, which helps enterprises pivot fast. The suite makes collaborative planning easy and enables quick decision-making. Different modules for specific functions enable functional improvements. For instance, Workday’s Financial Management module crunches all variables to enable smarter decisions and drive innovation. The Human Capital management module empowers the workforce and makes HR systems future-proof. Seamless work processes free up the CIo from pitting out fires. The senior management and top talent can focus on higher-level and strategic tasks.
