Tech Spending Climbs as Digital Business Initiatives Grow

Enterprise organizations can expect an increase in funds for technology spending in the next couple of years. But the source of funds for many new digital business initiatives will more frequently come from business departments outside of IT. This shift means that while technology spending is on the increase, the budget controlled by the CIO could possibly only be a piece of that overall tech spending.

That's according to a new IT spending forecast from Gartner that projects worldwide IT spending for 2021 will hit $4.1 trillion, an 8.4% increase over 2020.

Whether or not the CIO controls all the technology spending has to do with how that executive has positioned his or her role in the organization. For CIOs who have made new digital business initiatives and product development a part of their charter, they will have more control over total tech spending within the organization, according to John-David Lovelock, chief forecaster at Gartner.

It comes down to whether the budget item is supporting the business or whether it is funding the value the business provides to customers.

"As digital business progresses it goes from supporting the value to being the value," Lovelock said. "That is when we see the change. It goes out of the CIO's hands and goes into the hands of the project manager. Rather than going for a percentage of budget we are going for a percentage of revenue."

In some cases, this moves some power, influence, and spending power away from CIOs and gives it to other executives within the business. But not in every case.

"This is a CIO's biggest opportunity to gain influence," Lovelock said. "These [new digital business initiatives] are the projects that will be most aligned to the CEO and board level. It changes the value proposition of the company. These projects have visibility high up in the organization."

For those CIOs who aren't yet at this point, Lovelock advises that they work with their CTOs or work to become the CTO, with the goal of bringing a value proposition to the company.

CIOs who can bring revenue value to their organizations in this way will find themselves in control of a much larger spending budget.

"IT no longer just supports corporate operations as it traditionally has, but it is fully participating in business value delivery," Lovelock said. "Not only does this shift IT from a back-office role to the front of business, but it also changes the source of funding from an overhead expense that is maintained, monitored, and sometimes cut, to the thing that drives revenue.

Here's how organizations will spend their technology dollars in 2021, according to Gartner's 2021 IT spending forecast. Data center systems spending will rise by 7.7% to $237 billion. Enterprise software spending will rise by 10.8% to $517 billion. Device spending will rise by 14% to $756 billion. IT services spending will rise by 9% to $1.123 trillion. Communications services spending will rise by 4.6% to $1.45 trillion.

Social software, collaboration platforms, and human capital management software are categories that are capturing increased spending dollars in 2021 as organizations focus on the employee experience and well-being a year into the pandemic. While a great deal of attention was placed on work-from-home, work-from-anywhere, and remote work in 2020, and the quick pivot to those areas, this year more attention is going to how workers are experiencing this new way of working.

Efforts are going beyond measuring and monitoring employee productivity, Lovelock said. Now organizations are also looking at how they can help improve employees' emotional state, too.

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