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Technology Purchases from Line of Business Budgets Forecast to Grow Faster Than Purchases Funded by the IT Organization, According to IDCA new update to the Worldwide Semiannual IT Spending Guide: Line of Business from the International Data Corporation (IDC) forecasts worldwide corporate IT spending funded by non-IT business units will reach $609 billion in 2017, an increase of 5.9% over 2016. The Spending Guide, which quantifies the purchasing power of line of business (LoB) technology buyers by providing a detailed examination of where the funding for a variety of IT purchases originates, also forecasts LoB spending to achieve a compound annual growth rate (CAGR) of 5.9% over the 2015-2020 forecast period. In comparison, technology spending by IT buyers is forecast to have a five-year CAGR of 2.3%. By 2020, IDC (News - Alert) expects LoB technology spending to be nearly equal to that of the IT organization. "Companies' adaptation of Innovation Accelerators, such as Internet of Things, Cognitive/AI systems, and 3D Printing, together with the four Pillar technologies of the 3rd Platform, to both new product and service developments and day-to-day business operations has fundamentally increased Line of Business spending on IT," said Naoko Iwamoto, senior market analyst with the IDC Japan IT Spending Group. "The Innovation Accelerators have put the line of business units in the frontline of the digital transformation and have forced them to work either alone with the ecosystem outside of the IT organization as 'shadow IT' or in closer collaboration with the IT department than ever before." IDC's Line of Business taxonomy identifies two major types of technology spending - purchases funded by the IT organization and purchases funded by technology buyers outside of IT. Joint purchases can be funded by either IT or the functional business unit while "shadow IT" projects are funded from the functional area budget without the knowledge, involvement, or support of the IT department. Although some technology categories are dominated by IT spending, most involve outlays from both IT and the business units. For example, worldwide IT spending on servers, storage, and network equipment is forecast to total $114.1 billion this year, while LoB spending on these items will total $52.9 billion. However, IT is not the primary source of funding for all hardware purchases. Business unit spending on PCs, monitors, mobile phones, printers, and tablets will total $83.8 billion worldwide this year compared to $76.2 billion spent by the IT department. And line of business buyers will spend more on software applications in 2017 ($150.7 billion) than IT buyers ($64.7 billion). The technology categories that will see the most spending from LoB buyers in 2017 will be applications ($150.7 billion), project-oriented services ($120.3 billion), and outsourcing ($70.3 billion). The categories that will receive the most spending from IT buyers this year will be outsourcing ($149.2 billion), project-oriented services ($82.2 billion), and support and training ($79.8 billion). Combined IT-LoB purchases of outsourcing and project-oriented services ($422 billion) will represent nearly one third of all technology spending worldwide in 2017. The technology categories that will see the fastest growth in spending over the 2015-2020 forecast period are tablets (16.2% CAGR for IT and LoB purchases combined) and midrange enterprise servers (14.7% combined CAGR). LoB buyers will also continue to invest aggressively in applications and application development and deployment (8.5% and 9.3% CAGRs, respectively). In 2017, IDC expects LoB technology spending to be larger than IT organization spending in five industries: discrete manufacturing, healthcare, media, personal and consumer services, and securities and investment services. By 2020, this number is forecast to grow to nine as the insurance, process manufacturing, professional services, and retail industries see LoB purchases move ahead of IT purchases. The industries with the fastest growth in LoB spending are professional services (6.9% CAGR), healthcare (6.6%), and banking (6.5%). However, LoB technology spending is forecast to grow faster than that of the IT organization in all 16 industries covered in the spending guide. On a geographic basis, the IT organization will be the largest source of technology spending throughout the forecast in all but four countries: the United States, Canada, Saudi Arabia, and the United Arab Emirates. And like the industry trend, LoB spending is forecast to grow at a faster rate than IT-led technology spending in nearly every country. The countries that will experience the fastest LoB spending growth include Indonesia and the Philippines (each with a 12.2% CAGR), Argentina (11.1% CAGR), Peru (8.7% CAGR), and India (8.4% CAGR). "Explosive cloud and other 3rd Platform technology adoption is enabling U.S. lines of businesses to rely less on enterprise IT than any other country to fund their technology purchases," said Eileen Smith, program director, Customer Insights and Analysis. "On average, U.S. line of business will fund 62% of their technology purchases in 2017. Looking to increase productivity and reduce organizational costs, IDC expects supply chain, human resources, and sales executives will fund the largest share of their companies' technology purchases over the forecast period." "While the LoB-funded IT spending shows steady growth of 3.1% CAGR in the forecast period in Japan, almost 70% of technology spending comes from IT with a 1.3% CAGR," said Iwamoto. "As the competition escalates in the worldwide marketplace as well as with the disruptors from different industry segments, Japanese companies are trying to hold their position by employing a globally standardized IT and business processes initiated at the headquarters. The reinforcement of the IT governance among Japanese large enterprises will keep the higher ratio of IT funded." The IDC Worldwide Semiannual IT Spending Guide: Line of Business quantifies the purchasing power of the non-IT department technology buyer by detailing enterprise IT spending for 20 technologies and 12 corporate functional areas across 16 enterprise industries in eight regions and 53 countries. This IDC Spending Guide provides a granular view of the market for IT spending from a geographic, industry, functional (LoB), and technology perspective. Unlike any other research in the industry, the LoB Spending Guide was designed to help business and IT decision makers to better understand the scope and direction of corporate technology spending over the next five years.
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View source version on businesswire.com: http://www.businesswire.com/news/home/20170323005195/en/ |
