Tech Spend Is Up, but Are IT Departments Managing These Investments Well?

IT leaders at many organizations struggle to justify spending on technology products and services to business executives, who in many cases view IT as a black hole into which countless dollars fall with little to show for the investment.

Despite this, spending is continuing to rise, according to industry studies. Research firm Gartner Inc., in a report released in April 2018, said worldwide IT spending is projected to total $3.7 trillion in 2018, an increase of 6.2% from 2017.

This is the highest annual growth rate Gartner has forecast since 2007 and is a sign of a new cycle of IT growth, according to John-David Lovelock, research vice president at the firm. Spending on IT around the world is growing at expected levels, he said. Enterprise software spending is forecast to see the highest growth in 2018, with an 11.1% increase to $391 billion. Organizations will increase spending on IT services by 7.4% to $1 trillion in 2018.

Gartner also announced that after a decline of 3% in 2017, worldwide shipments of end-user devices, including PCs, tablets, and mobile phones, are forecast to increase by 7% this year, totaling 2.3 billion units. Despite PC prices increasing 4.6% in 2018, PC market unit demand, driven by business buying, is stabilizing through 2018, the firm said.

Further evidence of increased technology spending comes from online IT community Spiceworks, which in its 2018 State of IT report released in late 2017 said most IT budgets in 2018 are expected to stabilize and in many cases grow.

Many organizations plan to hire more IT staff and increase their adoption of emerging technologies, such as artificial intelligence (AI), Internet of Things (IoT), and virtual reality (VR) solutions, the Spiceworks report said. The research also indicated budgets for cloud-based services are on the rise.

In 2018, 44% of the 1,003 IT professionals Spiceworks surveyed in North America and Europe expect their IT budgets to increase. Only 11% of the companies expect IT budgets to decrease. Those companies that anticipate budgetary gains said they expect a 19% increase in IT budgets on average.

The anticipated increased spending on technology is a bit ironic, given that so many IT leaders already struggle to justify spending to business leaders in their organizations. But the rise in spending is not surprising. Many companies are racing to deploy the latest technology as they aim to become “digital businesses.”

The rush to implement AI, IoT, big data/analytics, and other solutions might make sense from a competitive standpoint. If companies don’t move fast enough, their competitors could beat them to the punch and win over their customers. But it doesn’t make sense from a smart business standpoint.

Managing technology funds well involves balancing analysis and speed. Companies don’t have time in today’s business environment to conduct old school, detailed project plans. On the other hand, if they do too little analysis they are likely to waste money. Forward-thinking, successful IT departments rely more on quick decision-making that’s made with sound, readily available facts. In short, they need to be more agile.

No organization should be throwing more money into an IT department that doesn’t manage itself like a business and balance speed to market with good business analysis. Every major project needs to have a business case and a desired outcome. Each incident of IT spending should be made with the company’s business goals in mind, and come with metrics that indicate a return on investment (ROI) for the organizations.

It’s great news that so many companies are looking to increase technology spending. But if this spend comes without a business plan, it could end up doing more harm than good for organizations.

Bob Violino is a freelance writer who covers a variety of technology and business topics, including cloud computing, mobile technology, big data/analytics and the Internet of Things.