This fall, Gartner presented its “Key Macro Trends Shaping the Future of the Enterprise Software Market,” a fascinating peek into what we can expect in the coming years. While anyone can download the recorded version, here are a few key points and a brief discussion of each.
Digital Business Is Disrupting the Entire Organization, Not Just IT
When we think digital, we think technology – and technology has traditionally been relegated to IT. Not anymore. Practically every enterprise department, from marketing to HR, now dabbles in technology, thanks in part to the ease of cloud applications.
In Gartner’s 2017 Digital Business Survey, Gartner found that CIOs are shifting their investments to enabling digital business models, spending, on average, 18 percent of their budget in support of digitalization. Gartner sees this growing to 28 percent by 2018. This shift is requiring foundational changes in how IT operates.
Digital technology is not only transforming the business, it is driving the push to retire legacy hardware and software. According to Gartner, enterprise software represents nearly 10 percent of IT spending, but it is the fastest IT segment, with a CAGR growth rate of 8.5 percent, versus an average of only 3 percent in other IT segment areas. Software will grow to 12 percent of IT spending by 2021, and the U.S. leads the world at 47.8 percent of total software revenue.
The Changing Role of the CIO
Gartner says, “CIOs need to get their shop in order to be ready for what’s coming.” So, what does Gartner believe is coming? They identified two trends:
Mode 1 – introducing systems and processes that are fail-safe and secure.
Mode 2 – learning, discovering, experimenting and failing fast.
“Organizations that do well in digitalization figure out how to do both modes at the same time,” says Gartner. “It’s about finding out what technologies work, how they should be deployed, how they can be linked to create value and when they do, scale fast. CIOs must lead this effort and change the culture.”
Related: The #1 Biggest Risk to CIOs
There is an old adage Gartner quotes: “Experienced hands; beginner’s mind.” What does this mean to a CIO? It means CIOs must use their experience to get the work done, but at the same time, look at everything with fresh eyes and no bias. They can reinvent themselves and the business if they can see things as they really are and not as they believe they are or as they have always been.
CIOs are in an interesting spot. They are no longer simply in charge of technology. They are the minds behind the transformation. They are not order takers and issue resolvers, but influencers. They must be able to answer where and how the company plays in the larger ecosystem. They need to think about how they can link new technologies, perhaps through open architectures and APIs, with data.
Ah, data. It always comes down to data. When you have solid customer master data and product master data, the next question is, what are you going to do with it? With new technologies emerging at breakneck speed, how can CIOs help the organization, every department, optimize this data?
The question companies should be asking is less about how they can get data to the customer and more about what information do our customers have that they can share with us, so we can design better offers and targeted services on a personal level? “The ultimate digital business model for leading organizations is that they create a platform where there is information sharing between consumers,” says Gartner.
It’s all about developing a community, where information and ideas can be shared, crowdsourced and leveraged.
IT Spending Isn’t Just for IT
In our business, shadow IT is a hot topic. Shadow IT is all of that fragmented, ungoverned software that is out of the control of IT. Shadow IT is loathed by IT departments trying to control its platform to reduce costs and risks. Surprisingly, Gartner doesn’t believe shadow IT is all that bad, as long as it’s approached correctly.
“Call it Citizen Innovation, instead of Shadow IT,” says Gartner. “It’s a better description of the people in different areas, like marketing, HR and supply chain, who know how to apply technology to solve their individual problems and it should be embraced.” Instead of banning it, Gartner believes it’s an opportunity for CIOs to guide and influence technology decisions.
“Every company is now a technology company and every department is technology driven,” says Gartner. Gartner predicts by the end of 2017, 50 percent of total IT spending will be spent outside of the formal IT organization. The CEO must lead the company in how each department can invest in technology.
Applications are generally growing above average and faster than infrastructure software components. Gartner tells us to eliminate as many systems as possible that are in their portfolio. Why? Cost savings is just one reason. Freeing up the mind is the biggest benefit.
“When there is less time spent on legacy systems, you have more time to think about innovation, digital capabilities and bimodal operations that have more value-add,” says Gartner. “The cost savings can then fund growth. Do more by divesting systems and replace them with subscription services (SaaS, IaaS, PaaS), leveraging other platforms.”
Gartner is quick to clarify the difference between divesting and outsourcing. “Outsourcing means you give your systems to someone else to run but they are still your systems and you own them,” they say. “The better model is to buy into a larger ecosystem where there are benefits with functionality, benchmark data, and exchange of data. There’s a transfer of ownership, such as SaaS for office applications and business applications. The moment you join someone else’s platform, you can benchmark how you’re doing and get access to other data as well. Leverage the whole community. You don’t sell functionality, you sell the community – if you join our cloud, this is the community you get. Cloud is not a functionality, it is a community play.”
The more systems and cloud platforms you join or create, the greater the need for unified SaaS management. The cloud and SaaS applications may bring extensive benefits, but they must be managed well. As IT and the business is transformed by digital technologies, be sure you stay in control, have visibility and transparency, and implement best management practices.