State Of Enterprise IT 2018

The evolution of IT

2017 vs 2018 - what's changed?

By Sarah Thorp, Research Director

At the end of 2016, we spoke to IT decision makers in enterprise organisations in both the UK and US about how their organisations buy IT products and services. That research found that companies are buying more than ever before, but that it’s not necessarily the IT department that makes purchasing decisions any more. In fact, only 22% of people we spoke to in 2016 said that decisions about IT spend were made solely in the IT department.


Organisations where IT spend by other departments is increasing

Speaking to IT decision makers in UK and US enterprises again this year, the percentage of the overall IT budget allocated to departments other than IT continues to grow. It increased by 7.8% on average last year, and has gone up again by 7.2% on average again this year 2016{1,4,8}2018. Nine in ten say that spend by other departments is either static (25%) or increasing (65%).

One of the reasons for this is that more departments are spending on IT-related products and services. It was an average of 3.3 departments at the start of the year, and is now 3.5 2016{66,70}2017. It’s also likely that departments that were already spending are wanting to spend more too.

What that budget is being spent on shouldn’t be a surprise. Around a quarter last year said that individual departments were buying department-specific items like HR software or accountancy packages. This has shot up to 38% saying that departments are now buying their own on-premise software solutions and services 2016{25,38}2017, and 36% getting cloud-based software and services 2016{25,36}2017. As these software and services are explicitly designed for each department’s needs, we see this increase as a reflection both of the growing independence of individual departments, and vendors being more likely to target and sell to individual departments rather than the IT department directly.

One area where departments are starting to decrease their spend is application development, which has gone down slightly year on year 2016{87,81}2017. There could be a few reasons for this, like existing apps now being mature enough to only require maintenance investment, or that the cost of application development in general is starting to become cheaper. It’s likely also a result of departments increasing their spend on buying their own services - departments are less likely to need to create their own applications as they continue to deploy cloud- and on-premise solutions that are already tailored to their needs. Why go to the trouble and expense of developing something yourself when a similar solution from a vendor already exists?

All of this suggests that IT spend in non-IT departments is exclusively on software and services, which might imply that the IT department is still where all hardware is purchased. That’s becoming less true over time. Last year, three in ten respondents said that departments were buying end-user computing devices like laptops and mobiles, which has now gone up to four in ten 2016{33,41}2017. The results for buying peripherals like keyboards and printers are very similar 2016{35,40}2017.

Departments are increasingly spending in all areas of IT specifically for their own needs.

The impact of this is that these departments are more likely to be involved in IT strategy. 24% told us last year that the IT department isn’t involved in decisions about IT purchasing and strategy, which has now gone up to 28% 2016{48,56}2017. In the same period, engineering 2016{19,38}2017, logistics 2016{8,20}2017, and business direction and strategy 2016{60,80}2017 are all much more likely to be involved in IT strategy.

Simply put, individual departments are more in control of the hardware, software, and services they use than ever.

If that’s true, what does it mean for the IT department?

One of our main findings in last year’s research was that only 22% of IT decision makers told us that the IT department alone is responsible for IT spend. Most reported that while the majority budget is spent by IT, it’s likely that other departments will have their own technology budget.

This looked like a trend. We expected this percentage to decrease year-on-year, for decisions about IT purchases to happen across more of the business over time. Given how breathlessly the business press talks about how revolutionary some technology trends like AI, machine learning, and automation will be to every industry, why wouldn’t spend happen across all parts of the business, not just in the IT department? And as the research so far shows that individual departments are increasingly likely to be spending on hardware, software, and services, it follows that IT’s control must be decreasing.

Imagine our surprise when this year’s repeat of the research contradicted this.

At the end of 2017, IT decision makers in enterprise organisations report that decisions about IT spend are more likely to now happen just in the IT department than in 2016. In just a year, the number has doubled from 22% to 40% 2016{22,40}2017.

How can that be possible?

We think the answer lies in how organisations are looking at emerging technologies.

Let’s look at the organisations as a whole rather than at a departmental level. What are enterprises doing about IT and technology in general?

Almost everyone we spoke to told us that their organisation is at the very least investigating most emerging technology trends, things like blockchain, AI, and machine learning. Three of these digital trends - the Internet of Things, hybrid cloud, and customer experience and personalisation - are being investigated by more than nine in ten, and even the least popular trend - cryptocurrencies - is being investigated by 69% of respondents’ organisations and 49% are either already investing in it or plan to do so.

Looking again at the data about IT strategy and spend, some departments have seen big year-on-year jumps. The logistics department is twice as likely to be making IT spend now, 23% say their operations department now makes IT spend compared with 14% nine months’ ago 2016{14,23}2017, and 32% say the same for business direction and strategy compared to 26% in January 2017 2016{26,32}2017. These departments are more likely to be making decisions about strategy too: 10% say their logistics department now makes decisions about IT strategy compared to 4% before 2016{4,10}2017, engineering’s gone from 7% to 19% 2016{7,19}2017, and business direction and strategy has increased from 30% to 40% 2016{30,40}2017.

Enterprises in the UK and US are exploring new technology trends, looking for the next opportunity to give them the edge over their competitors. It’s not just one part of the company that’s doing this - it’s happening right across the business, which means that more departments are getting more involved in the overall IT strategy for the company. Yet while organisations are now more likely to have some board-level technology roles (61% have a Chief Technology Officer, and 40% now have a Chief Data Officer, for example), they’re less likely to have a CIO. It’s still the board-level role that most organisations are likely to have, but it’s dropped from 71% last year to 66% this year 2016{71,66}2017.

How can that be? Is the CIO becoming redundant?

We believe the data shows a split. Enterprises are spending a lot of time and budget on digital products, services, trends, and opportunities, but many of these things are not what might be considered IT.

The technology trends that so many organisations are exploring - machine learning, blockchain, customer experience and personalisation etc. - are, at their core, strategic investigations. There may not be an obvious need to spend time and money on them beyond keeping up with competitors, but they may create opportunities for the company later on.

The IT department could help with their investigation and implementation. Indeed, as many individual departments are increasing their spend on end-user devices and department-specific programs and services, this could free up the IT department to spend more time investigating strategic topics.

But this is most definitely not happening.

In 2016, 44% of respondents told us that strategic activity was one of their top three key priorities. This has gone down year on year to 38% 2016{44,38}2017. The top priorities? Managing the IT infrastructure, and meeting regulatory compliance.

The IT department in enterprise organisations isn’t becoming more strategically important to the company. The research suggests that on the contrary they’re more likely to be responsible for the core IT services - the network itself, connectivity issues, and data compliance. It’s management, not innovation. Organisations as a whole might be exploring new and emerging technological trends, but not within the walls of the IT department.

The data does imply that the IT department may be helping in a support capacity, though. 49% of respondents this year say that talking to people in other departments is more of a key priority for them individually. This could be advising on laptops and cloud services of course, but it may just as likely be some level of involvement in investigating and implementing digital trends. They’re not leading the charge, but they may still be able to influence discussions.

How should technology marketers target enterprises in 2018?

Last year, we suggested that departments outside of IT may be becoming more likely to buy IT products and services. This year’s research echoes that argument but much louder than before.

25th May 2018

Date when GDPR comes into effect

The IT department still has some involvement. It will vary from organisation to organisation, but IT departments are the guardians of the infrastructure and compliance, not necessarily the innovators. As GDPR comes into legislation in 2018, we expect to see them becoming concerned with this, which should have the knock-on effect of other departments buying and investigating more IT services, software, and solutions on their own. Compliance may make the IT department want to clamp down on other departments spending on IT, but as the adoption of cloud computing shows, it's likely they won't be able to.

Individual departments are increasingly purchasing IT products and services, so marketers should no longer be thinking about the technicians and decision makers in the IT department alone. That means different messaging, and different targeting too. Vendors need to think carefully about how to talk to an audience that aren’t necessarily IT professionals but are responsible for significant decisions about their departments’ digital direction.

If a vendor has propositions for those digital trends, like the Internet of Things or augmented reality, intelligent targeting and messaging will be more difficult. The research strongly suggests that the IT department may be assisting in those areas, but other parts of the business may be leading the investigation and experimentation. Talking to existing contacts in the IT department to understand how their organisation approaches each trend would be advisable. If the contact implies that their organisation isn’t investigating each trend, the research says the IT department is being kept out of the loop.

Going beyond 2018

This year is going to be tough for the IT department.

It seems they’re not leading on strategic work around digital technologies. Almost all IT decision makers that we spoke to say that their organisations are investigating these trends at the very least, but they themselves are out of the loop. We’ve seen in other research that IT decision makers want to be strategic, but that’s simply not happening right now.

The IT department is increasingly responsible for compliance, and GDPR remains a big unknown in that regard. It’s likely to require a lot of their time and attention, potentially creating issues for parts of the company that have bought products and services which aren’t GDPR compliant.

While vendors may be happy to see that organisations' investment in digital technologies is going up as a whole, they need to understand that enterprises are starting to see ‘digital technologies‘ and ‘IT’ as two separate things. Beyond 2018, we could conceivably see the IT department being rolled into the operations department, while digital trends and innovation happen elsewhere.

Any thoughts?

Other reports about the state of enterprise IT: