by Joshua Whitney Allen

2015: The year of bigger IT budgets, consequences, and possibilities

Published February 22, 2015


By the claim of business professionals around the world, 2015 will be a time of commitment and expansion in the global economy’s use of information technology.

Emboldened by the belief that high-pro­file technologies can ensure their companies the best route to pro­fits and affordable operations, executives and IT staff are ready to spend more money on mobile, cloud, and analytics.

Throughout dozens of industries and markets, there appear only distant limits to IT spending, and the ­ first question for decision makers and technical staff lies in the favorable dilemma of choosing the best resource to add to their tech portfolios.


Across the international economy, companies are allocating greater amounts to organizational budgets. According to a recent Insights Magazine survey of its readers, over 60 percent of respondents will enjoy increased IT budgets in 2015. They are looking with patient anticipation at investments—offered by both IBM and competitors—that will grant their companies inexpensive storage and operations capacities. They will commit to analytics packages designed to sharpen judgment throughout a firm’s decision chain. Their customers and workers, now seemingly inseparable from smartphones and tablets, will be able to interact with the business with an intimacy that defines—rather than merely augments—their experience.

“Cloud, mobile, the Internet of Things—these are all of the really hot growth areas going forward,” says IT analyst Jeff Kagan, who comments on technology for national broadcast media. “These are brand new spaces. They didn’t really exist on anyone’s radar more than a few years ago. Companies see the future and see growth for connecting everyone, and they are really attacking this opportunity rapidly.”

Companies that built business models on microscopic costs could face significant impact on operating expenses, and startups looking for funding will need to deal with a new level of uncertainty in their financials, which makes investment and scale more difficult.

Chris Smith, Co-Founder and Partner, Arryve Consulting

The largesse is inspired in part by the universal excitement around data, mobile, and cloud, with much of the groundswell pushed by the promotional might of the world’s largest ­ rms. Along with IBM’s shifted focus on cloud services, Oracle, SAP, and other giants steadily announce upgrades and new products in the three battleground categories. With the marketing messages delivered with the tone-perfect skill of these multinational corporations, an executive can be entirely convinced that a firm’s competitiveness depends on the value inherent in these hypermodern concepts.

“[It’s] an enormous opportunity that’s going to change every industry, and we’re just in the very early stages of it,” says Kagan. “I can’t tell you who the winners and losers will be. All I can say is that there will be enormous money invested by tons of companies in many different segments—automotive, healthcare, retail, home improvement.”

In line with Insights Magazine’s research, the world’s tech and business media has cast the near-term future of IT as one of mobile development, continued analytics adoption, and cloud deployments. Computerworld surveyed the tech budgets of nearly 200 respondents, and 43 percent said that they expect their IT budgets to increase. Releasing the results of its own survey on spending for 2015, Computer Economics found that nearly 75 percent of North American respondents reported budget increases for the coming year.

Going deeper, Insights Magazine’s research reveals the motivations and measured criteria that executives and IT pros are conveying as they consider mobile, data, and cloud assets. Respondents to Insights Magazine’s survey have several regards when investigating potential tech investments. Over 65 percent will examine mobile products; 60 percent will assess cloud. Though the factors determining the cost and form of these purchases vary wildly, four main concerns come up, over and over, and seem the determiners of IT buying in 2015: How a technology impacts the customer; the capacity of staff to implement the technology; how much operational efficiency the solution can provide; and perhaps most meaningful to the success of both the enterprise and the technology itself, how the solution impacts the business.

Industries look to disruptive IT to answer new and classic problems
Insights Magazine’s research illuminates the spanning expectations of both purchasers and technical staff, who are clearly inspired by the possibilities of mobile, cloud, and data for cheaper storage and expanded customer insight and interaction. At the same time, it is also apparent that pros expect the ascendance of these technologies to serve the chronic challenges of conducting business. And above all, customers will need to foresee a number of ramifications, some barely understood, when engaging the hot properties in IT.

The simple selection of products that Insights Magazine respondents say they are evaluating is proof of the competitive confines of the market. Overall, 77 percent of survey respondents are probing both IBM and competitor cloud products, and included in that sample are purchasers who specify their interest in Amazon Web Services and Microsoft Azure cloud packages as well as Big Blue’s offerings.

Most preparations around cloud center on comparisons of public, private, or hybrid deployments, but cloud implementation carries less prominent questions.

We saw a revolution with wireless in the 80s, and the Internet in the 90s, and it transformed industries. Companies that were on the early edges won. The companies that weren’t on the early edges started to lose.

Jeff Kagan, IT analyst, national broadcast media

“From an accounting standpoint, there are OPEX vs. CAPEX complexities—how you are accounting for a service used and paid for over time versus the servers and other physical equipment that is purchased and able to be depreciated,” says Chris Smith, Co-Founder and Partner of Arryve Consulting. “Companies that built business models on microscopic costs could face significant impact on operating expenses, and startups looking for funding will need to deal with a new level of uncertainty in their financials, which makes investment and scale more difficult. All companies should be doing detailed total cost of ownership analyses to make the right financial decisions.”

By Insights Magazine’s research, several respondents report that they are looking at VMWare’s cloud and virtualization products. The resultant virtualization strategy means such companies must cope with a massive data yield from their tech environments. They then must make steps to manage the costly problem of virtualization sprawl, where virtual machines get lost in the complexity of IT ecosystems, yet still draw on resources and funds.

“In the last two or three years, the ability to take information that is being collected in a raw format in a virtual environment has been improved to the point that we can make sense of the data,” says Kevin Gruneisen, Senior Director of Cloud and Data Center Solutions at Logicalis. “Customers can assign a value to that cost. A customer would look and see that they are 80 percent virtualized yet 95 percent oversized on memory—you can definitely look at the cost of memory and say ‘it is costing my company X amount of dollars’.”

Even with last year’s growth of the mobile device and marketing areas, mobile business will only grow in the next 12 months. Ninety-five percent of Insights Magazine’s survey participants say their mobile budgets are going up or holding as they were in 2014. Several respondents note that they’ll invest in mobile connectivity and development systems, including IBM MobileFirst Platform Foundation (formally known as IBM Worklight) and IBM Bluemix. Such investments force an obligation onto companies that adds to the already urgent task of modern IT security. Any enterprise with a mobile portfolio will need to assume mobile device management. This practice safeguards an entire IT ecosystem by treating every phone and tablet—thousands of devices moving in and out of the network, giving and taking data—with inter-device compatibility, data encryption, VPN, and simple password protection.

With a handful of respondents stating they’ll examine Hadoop and big data concepts, analytics retains its place as an alluring capability for businesses, while continuing to raise personnel and skillset demands.

“While the general population of IT professionals provides a strong talent base for foundational implementation of each of these technologies,” says Smith, “the fact that the technologies are evolving so quickly means that training, certification, and experience will lag behind.”

“This isn’t just for technical jobs either,” Smith continues. “Marketing, sales, finance, and operations all need to advance to stay ahead. We’re facing a very real scenario where there simply won’t be a workforce ready for this future.”

To some, mobile and analytics approach the level of business necessity held by, say, accounting software or email. An Insights Magazine survey respondent based in Istanbul and working for a multinational bank cites the firm’s broadened budgets for analytics and mobile resources as well as for core banking solutions. Yet much of IT’s responsibility in 2015 remains a mission of repair and upkeep. Several respondents are shopping for operations software like Microsoft Office 365, IBM Business Process Manager, and IBM Operational Decision Management. Essential functions aren’t made easier with concerns over security and data protection, which surely trouble any professional who follows the news or Twitter.

“[Our] year will be characterized by maintenance more than anything,” says Jonathan Furuya, an IT manager at TOK America, a semiconductor and chemical company. “Cost is a big driving factor [for purchasing priority], yet security is an area where we’ll need to pay more attention.

“We are a worldwide company, and data loss prevention is an area where we’ve tried to implement. The main concern is—with the recent Sony Films debacle—we’re very curious about how that is going to affect purchasing overall.”

Opportunities abound throughout government, healthcare
With so much money assigned to IT spending, plenty of willing customers appear throughout both private and public sectors, each with unique needs and notable for the vigor of their attitudes towards data, cloud, and mobility. The American government spent nearly $75 billion on technology in 2013; in 2014, the federal cloud spend exceeded budgets by almost $800 million. Some of the recent U.S. tech spending went into national security programs, including analytics concepts to sift through the billions of data points that, in a world of crime, unrest, and disease, American security agencies have identified as indicators of doom.

This spending trend will continue.

The 2015 Customs and Border Protection budget includes $11 million for geo-intelligence technology along the U.S.-Mexico border. Health and Human Services requested over $8 billion for IT in 2015. It is uncertain if technology adoption can occur fast enough for the missions of such active bureaucracies.

“Often it’s a matter of education, because usually the people who sign up for the government work—the so-called blue badgers—are most motivated by the mission and do not necessarily have the expertise and the technology,” says David Murgatroyd, Vice President of Engineering at Basis Technology, which sells analytics to U.S. intelligence and law enforcement agencies. “It’s an interesting relationship where they need to go outside to find the expertise and the technology and they need to know what’s possible.”

[Our] year will be characterized by maintenance more than anything. Cost is a big driving factor [for purchasing priority], yet security is an area where we’ll need to pay more attention.

Jonathan Furuya, IT manager, TOK America

In the private sector, several surveys assert that medical institutions, hospitals, and insurance companies perched upon mountainous data will continue their rapid adoption of analytics and cloud.

IDC suggests that “some 15 percent of hospitals will create comprehensive patient profiles by 2016, enabling them to deliver personalized treatment plans. By 2015, half of healthcare organizations will have experienced between one and five cyber attacks in the previous 12 months—with a third of those attacks successful.”

A Dell survey identifies a heavy reliance on cloud computing in the medical field, with 96 percent of respondents saying they were seriously considering cloud products, if they were not using them already. Competition will be tight in this area, with IBM’s avowed loyalty to cloud bringing it closer to players like Google, whose cloud platform is now tailored to support HIPAA compliance.

Software firm Malauzai surveyed the credit union industry and discovered plenty of enthusiasm for mobile adoption, as 65 percent of CUs with $50 million to $15 billion in assets had developed an Apple app, as compared to just 51 percent of banks in the same segment. Also evidenced by recent IBM partnerships with retail banks worldwide, personal finance is surely open to more and more technology—just as healthcare, government, and a host of industries are open, endorsing 2015 as a time of new ideas and giddy exploration.

“There is no consensus on either the greatest drivers—cost, transparency, time-to-market enhancements, or business models—or the challenges to adoption—complexity, risk, regulatory compliance, cost, or ROI,” says Smith.

“Sellers of services need to serve many masters and mentalities. Buyers of services need to articulate the problems they’re solving for. Adoption will happen, but with so many moving parts working against each other, it’s difficult to predict what will break free, or when.”

2015 arrives at a time of confluence, a moment when entrepreneurial ambition and technology will meet. Truly empowering IT lies before companies that, with the right amount of spirit and solvency, are positioned to put these latest concepts in tech to use.

“We saw a revolution with wireless in the 80s, and the Internet in the 90s, and it transformed industries,” says Kagan. “Companies that were on the early edges won. The companies that weren’t on the early edges started to lose. They had to rush to try and catch up. [Today] it’s not every company, but the ones that are will have the big competitive advantage. Eventually the other companies in the same space will have to jump in.

“It happens every time you have a new technology. We’re only in the first few years, it’s still chaotic, and there’s also enormous risk, yet your early adopters have the early advantage.”



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