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October 7, 2014

Internet of Things spend threatens traditional IT

IT budgets will shrink as departments adopt IoT.

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Businesses worldwide are set to spend $40bn on building and operating the Internet of Things (IoT) as internet-connected devices threaten to shift IT spending power.

That is according to Gartner, which predicts that IT spending will surpass $3.9 trillion in 2015, a 3.9% increase from 2014, driven by an influx of machines, cars, appliances and mobile devices that communicate with each other over the Internet.

At the Gartner Symposium/ITxpo 2014, the analyst firm said 650 million new devices had become online since 2013, while 10% of automobiles have become connected and the number of chief data officer and chief digital officer positions has doubled.

Peter Sondergaard, Gartner global head of research, said: "This year organisations will spend over $40 billion designing, implementing and operating the IoT. Every piece of equipment, anything of value, will have embedded sensors. This means leading asset-intensive enterprises will have over half a million IP addressable objects in 2020."

As a result, there is a dramatic shift in IT spending power, he claimed.

"38% of total IT spend is outside of IT already, with a disproportionate amount in digital. By 2017, it will be over 50%," Sondergaard said.

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"Digital startups sit inside your own organisation, in your marketing department, in HR, in logistics and in sales. Your business units are acting as technology startups.

He added: "Millions of sales people and hundreds of thousands of resellers and channel partners are looking for new money flows in the fluid digital world, and they are finding eager buyers."

The answer lies in ‘bimodal IT’, according to Sondergaard, which he defined as filling the digital divide between what IT provides and what the enterprise really needs.

"Mode 1 is traditional, and the systems that support them must be reliable, predictable, and safe (like a great IT organisation). Mode 2 is nonsequential, emphasising agility and speed (like a start-up) because disruption can occur at anytime," the research said.

Gartner also predicted that digital businesses will impact jobs in different ways. By 2018, digital businesses will require half as many traditional labour workers in as digital jobs increase by 500%.

Sondergaard said: "The new digital start-ups in your business units are thirsting for data analysts, software developers and cloud vendor management staff, and they are often hiring them fast than IT.

"They may be experimenting with smart machines, seeking technology expertise IT often doesn’t have. You must build talent for the digital organisation of 2020 now. Not just the digital technology organisation, but the whole enterprise. Talent is the key to digital leadership. Build credibility and build the two-speed organisation."

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