IT Spending – 2017

While on the international front, some re-engineering is required, back home, spends may be a bit cautious with lack of clarity in terms of overall outlook.

On the threshold of 2017, the Indian IT sector finds itself at crossroads. On the international market, there are high-impact events including slump in oil prices, the impact of Brexit, the results from the US elections, slowdown in spending at banks and financial institutions, and in China leading to a multiplier effect on an already slow growth in several emerging economies.

The UK and the US governments seem to be putting in place stricter curbs on hiring foreign nationals by rendering visa procedures more stringent. The overall political mood is sharply polarized in favor of protectionist sentiments. Of course, India may have some advantage in this negotiation, on the strength of its reserves of qualified manpower.

The IT industry would be well advised to move toward a visa-independent scenario. With advances in technology such as virtual reality and collaborative technologies, location ceases to be relevant.

Visas are one critical area of contention for companies. On the other side, rapid technological shifts are causing widespread disruptions in, for instance, banking and oil and energy prices. Additionally, retail giants are facing the heat from e-commerce retailers. The sector finds itself unable to propel itself to the next level in technology, the effect of which can render these service providers utterly useless to their clients in a matter of months. There is a need to reskill existing teams to ensure that they can upskill, where needed, or learn new competencies.

The Indian businesses in the backdrop of demonetization, will need to prepare for GST. Spends will still be a bit cautious with lack of clarity in terms of overall outlook.

On the positive side, Gartner has predicted a 6.9 percent increase in IT spending in India, to reach Rs 485,080 crore in 2017, up from Rs 453,590 crore (USD 67.7 billion) in 2016. The key vertical segments driving IT spending growth include the communications, media and services, banking and securities, and manufacturing and utilities markets. Software and IT services spending is projected to have the highest growth rate as companies work toward creating digital applications on which enterprise organizations’ digital business models are being built. Some leading-edge organizations are already starting to extend that journey to the beginnings of algorithmic business.

Software spending is projected to grow 7.3 percent in 2016, and it will grow another 12.8 percent in 2017 to a total of Rs 33,500 crore. IT services spending is on pace to grow 8.3 percent in 2016 to reach Rs 73,700 crore and increase 13.5 percent in 2017 to reach Rs 83,750 crore (USD 12.5 billion).

CIOs will participate in the building of a new digital platform with intelligence at the center. That platform will enable ecosystems, connecting businesses and collapsing industries. Gartner analysts said it will change society itself, and the way people live.

The new digital platform consists of five domains – traditional IT systems, customer experience, The Internet of Things (IoT), an ecosystem foundation, and the intelligence platform that ties all the domains together.

Further insight into the five elements of the new digital platform includes:

Traditional core IT systems. This is how CIOs run and scale operations. It is building on what has already been built. It is taking high-performing traditional IT systems (such as the data centers and networks) and modernizing them to be part of the digital platform. For example, leading organizations are halfway through the transition to the cloud. It started with sales and marketing, and now half of
sales-support capabilities are in the cloud. This migration will continue through the end of the decade into functions such as HR, procurement, and financial management.

Customer experience. This is how CIOs connect and engage in new ways. The digital customer experience may be the only one that the customers have. This is how the business engages in the digital world. The pioneers are exploring how new experiences such as virtual and augmented reality will change the way customers engage.

The Internet of Things (IoT). This is how the organization senses and acts in the physical world. Adding devices to the IoT domain is the easy part. Processes, workflows, and data integration are much harder. In fact, two-thirds of organizations have had to rework their existing IT systems to accommodate IoT. IoT also changes how CIOs should invest in analytics because decisions must move from days to minutes to instants. CIOs should plan to shift their investments in analytics to real time. Real-time analytics will outpace traditional analytics by a factor of three by 2020 to become 30 percent of the market.

Intelligence. This is how the systems analyze, learn, and decide independently. CIOs start with traditional data management, data science, and data intelligence. Algorithms determine the action. The new type of intelligence, driven by machine learning is artificial intelligence.

Ecosystem foundation. This is how the enterprise interacts as an institution in the digital world. Ecosystems go beyond the capability to decide. CIOs need to build the capability to interact with customers, partners, adjacent industries, even the competitors. The ecosystems allow for the transformation from traditional business with linear value supply chains to networked digital ecosystem businesses.

Many industry models will transform with digital ecosystems – moving from simple relationships run by intermediaries toward distributed partnerships possibly managed by a shared distributed ledger system like blockchain. Building a strong ecosystem will help manage these dynamic interactions. Ecosystems are the future of the digital.