The Gartner Outsourcing Summit 2013 came up with some interesting data on the effect of digitisation on IT sourcing.
Surprisingly, 90% of IT budgets could soon be sent outside of the IT department by 2020, to be controlled by business executives. Trends in digitisation and consumerisation are responsible for the shift in control.
Cloud, mobile, social and analytics are all examples of technology that will be moving out of the remit of IT and into the wider business. Gartner analyst Frank Ridder predicted that in 2014, executives from non-IT backgrounds will begin taking on tech procurement abilities. This will lead to changes in the traditional procurement structure, in order to avoid the risk of improper sourcing.
“The ‘no clue’ buyer has arrived. They buy what they want, but do not know how to buy it,” said Ridder, referencing the fact that potentially uninformed business departments will not initially have the knowledge of sourcing best practice. Combine this with the data that says most business executives want to mirror personal technology usage in the workplace and the chance for inefficient purchasing is steep.
CIOs polled by Gartner said that currently 25% of the IT budget is controlled outside of the IT department. By 2015 it is believed that 40% will pass over, before finally arriving at the figure of 90% being out of IT’s control. It is described as an inevitable rather than a possibility that digitising customer services will lead to a reduction in reducing back-off IT costs. The subsequent service industrialisation will free up funding, which will go onto improving digital offerings through investment.
“The money has to be found because CIOs are already planning to increase spending on IT to change the business. The focus for European CIOs for the next few years will be profitability and growth” said Gartner analyst, Claudio Da Rold. 47% of CEOs have a digital strategy at the moment, with that number rising to 80% by 2015. Once again, the drivers behind this will be cloud, social, mobile and analytics.
To make the largest changes and show the best use of innovation, the current allocation of budget will need to be rebalanced. Currently 70% of the budget is spent on running the business, while 30% goes on changes and improvements. A recommended ratio of 50:50 would better serve CEOs to get the balance between functionality and future proofing.
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