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October 6, 2015

CIOs urged to look past big data to the IoT algorithmic economy

Analysis: Digitalisation trends in the IoT age are reshaping CIOs roles and how businesses respond to customer trends.

By Joao Lima

CIOs worldwide are shifting towards platform thinking as the industry is warned that big data is not everything and algorithms will play a key role in the digital era.

Worldwide IT spending has been forecasted to surpass $3.6 trillion in 2016, 1.5% more than in 2015 as the IT industry is being driven by digital business, and an environment driven by a connected world.

According to Gartner, spending on IoT hardware will exceed $2.5 million every minute in 2016, and in five years, one million new devices will come online every hour leading to even greater expenses but also revenue opportunities.

Speaking at Gartner Symposium/ITxpo 2015 in Orlando, Peter Sondergaard, SVP at Gartner, said that this growing number of devices is creating billions of new relationships, and that these relationships are not driven solely by data, but algorithms.

He said: "Data is inherently dumb. It does not actually do anything unless you know how to use it; how to act with it.

"Algorithms are where the real value lies. Algorithms define action. Dynamic algorithms are the core of new customer interactions."

Sondergaard also said that the algorithmic economy will power the next great leap in M2M evolution in the IoT.

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Products and services will be defined by the sophistication of their algorithms and services, and organisations will be valued, not just on their big data, but on the algorithms that turn that data into actions, and ultimately impact customers.

Platform thinking holds key for digital

In order to survive and thrive, leading businesses must shift to platform thinking in terms of their business models, delivery mechanisms, talent and leadership.

A global survey of 2,944 CIOs has found that hardcoded business and operational models will not suffice in the digitalisation era and that a more adaptable approach is required.

The Gartner report, "Building the Digital Platform: The 2016 CIO Agenda", has revealed that the average CIO expects digital revenue to grow from 16% to 37% of total revenue in the next five years. Public-sector CIOs are predicting a rise from 42% to 77% in digital processes.

Dave Aron, VP and Gartner Fellow, said: "Businesses and government agencies are looking less like fixed "systems" and more like platforms. A platform provides the business with a foundation where resources can come together to create value."

Bimodal business approach

As the algorithm and platform thinking realities settle in, the 2016 CIO survey has also found that nearly 40% of CIOs have two modes of IT, with the majority of the remainder planning to follow in the next three years.

The research firm said the evidence is that building a mature bimodal platform results in much better digital strategy performance, and that one of the worst things a CIO can do is to delay bimodal.

Sondergaard said traditional organisations move too slowly when they build digital on old Mode 1 platforms and that the solution is to create a type of bimodal organisation, introducing a new Mode 2 platform.

The Mode 2 platform uses more cloud than in-house infrastructure and applications. He said: "The new platform is less about data gathering, and more about intelligent algorithms to act on the data. Platforms matter because business as a whole has gone bimodal."

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