Stagnant IT Budgets Constraining Innovation

The transformation that is sweeping through every aspect of business is at a scale and pace never before witnessed. In its most recent IT industry predictions, IDC Australia pointed out that by 2020, half of Australia’s Top 500 will see the majority of their business depend on their ability to create digitally enhanced products, services, and experiences.

Nimble start-ups to mature enterprises are navigating the fourth industrial revolution by investing in new technologies such as Artificial Intelligence, IoT and machine learning – all with the purpose of advancing and accelerating innovation initiatives.  

But what about the mid-market – are they also keeping pace with the innovation curve? Only a year ago, more than half of Australia’s mid-sized companies didn’t believe they were evolving as quickly as they should in terms of innovation, and 40 per cent admitted they had failed to bring a new product or service to market in the past three years.

With digitally fit SMBs snapping at their heels and large enterprises with big budgets and even bigger mindsets, mid-market IT managers have a unique opportunity to help their leadership transform their business to keep pace. A core part of this is to embark on the right IT investment strategies to ramp up their digital transformation.

We interviewed IT Managers across Australia and found their top three priorities for their leadership teams are driving operational efficiency, delivering first class customer service and being a true innovation leader. However, the results of the interviews told us that 72 per cent of mid-market organisations are reporting stagnant growth in their annual IT spend in comparison to the Australian market average of a 2.8 per cent increase, according to Gartner.

According to IT managers, the number one technology that will play the biggest role in supporting mid-market growth as a whole is cloud computing (40%), which is in line with their investment priorities. The technologies that mid-market’s IT teams would like to allocate the most budget to over the next two years to drive business growth are cloud at 65 per cent, followed by unified communications at just over half (54 per cent), data storage at 40 per cent and big data analytics at 40 per cent  in the next two years.

72 per cent of mid-market organisations are reporting stagnant growth in their annual IT spend in comparison to the Australian market average of a 2.8 per cent increase

In comparison, the top areas for technology investment according to the 2017 Gartner CIO Agenda Survey findings show that significant spending will continue in big data and analytics at 42%, and that cloud, whilst continuing its momentum, is significantly lower at 28%, which leads us to believe cloud maturity across the mid-market is lagging that of the enterprise.

When asked to identify the top three information technology barriers to growth in their business, mid-market IT managers nominated legacy systems at 43 per cent, lack of integration to enable customer analytics (42%) and lack of engagement from the C-suite around how IT can support growth at 33 per cent. The latter point is particularly concerning given the economic impetus to invest in a digital transformation and innovation agenda. Without a seat at the table, how can IT truly consult the business on where these investments should be made. 

Unsurprisingly, IT managers think that a high-speed fibre network would deliver many positive opportunities, including increased reliability and flexibility (64%), improved service and experience for customers (62%) and a better fit for IoT and devices connectivity (48%), with over half of IT managers (53%) seeing IoT impacting their business in the next three years. Yet, the majority (88%) of IT managers surveyed say that the top barrier to changing/upgrading their network connectivity is thought to be no perceived need from their leadership team.

Only 13 per cent of mid-market IT managers think that AI and machine learning can play a role in supporting growth, even though the corporate dictum is to drive growth.

Innovation accelerators

Another area where the mid-market appears to be lagging is harnessing innovation accelerators such as data-driven and cognitive technologies – Artificial Intelligence (AI), Internet of Things (IoT) and machine learning – to drive new digital products, services and experiences. Only 13 per cent of mid-market IT managers think that AI and machine learning can play a role in supporting growth, even though the corporate dictum is to drive growth.

The same 2017 Gartner CIO Agenda Survey found that when it comes to disruptive technologies, ANZ CIOs consider advanced analytics, machine learning and augmented reality to be important as potential disrupters and sources of competitive advantage. And in fact, lean more toward less adopted technologies as potential disrupters than even their global peers on average.

According to Telsyte, Australian IT departments are jumping on new technologies for pilot projects and wider deployment at an unprecedented rate. Arguably it is the role of IT to recommend emerging technologies to transform the business, ensure new technologies are integrated with enterprise systems, and retool the infrastructure to support the digital enterprise but equally it requires a commitment from business leadership to listen to and consult with their IT team. Only 17% of IT managers interviewed said that the C-suite in their organisation is seeing IT as strategic. And less than One in Ten IT managers believe the C-Suite views the role of IT management as innovative.

When operating in a market with mainstream acceptance that digital technology and strategies will drive business outcomes, realising the growth promise of innovation requires a commitment from the business leadership to listen to the viewpoint of their IT leadership. 

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