Spending by Lines of Business Will Equal That of IT Departments
IT-related spending by the line of business will grow faster than spending by enterprise IT departments starting this year. However, IDC projects that by 2020 spending will be more or less equal.
A new report from market watcher International Data Corp. (IDC) says IT spending by lines of business will grow faster than conventional IT spending -- starting this year. IDC's Worldwide Semiannual IT Spending Guide: Line of Business projects that the share of IT spending attributable to non-IT business groups will exceed $600 billion in 2017. That's growth of 5.9 percent -- a rate IDC expects to persist through 2020.
By contrast, spending by IT departments will grow at a slower compound annual growth rate (2.3 percent) over the same period. The upshot, according to IDC, is that by 2020, IT spending by lines of business and enterprise IT departments will be more or less equal.
Behind the Shift
What's driving this? Naoko Iwamoto, a senior market analyst with the IDC Japan IT Spending Group, cites a number of technology trends, including the Internet of Things, artificial intelligence, and 3D printing.
Uptake of these technologies, combined with the shift to what IDC calls the "Third Platform," will be a catalyst for line-of-business IT spending. "[This has] put the line-of-business units in the frontline of the digital transformation and ... forced them to work either alone with the ecosystem outside of the organization as 'shadow IT' or in closer collaboration with the IT department than ever before," she said in a statement.
How did IDC arrive at its numbers? It uses a "line of business taxonomy" that distinguishes between two types of IT spending: conventional spending funded by IT itself, and spending attributed to non-IT purchasers. IDC's taxonomy also takes into account joint purchases, funded by both IT and the line of business, as well as shadow IT spending, which occurs "without the knowledge, involvement, or support of the IT department."
For 2017, IDC projects global spending on servers, storage, and networking kit to reach $114.1 billion -- almost half of which ($52.9 billion) will be generated by business units.
Both IT and lines of business will invest hugely in tablet devices (IDC projects a 16.2 percent compound annual growth rate through 2020), along with, of all things, midrange servers (a 14.4 percent compound annual growth rate over the same period).
In some technology categories, line-of-business spending is already outpacing IT's. "IT is not the primary source of funding for all hardware purchases. Business unit spending on PCs, monitors, mobile phones, printers, and tablets will total $83.8 billion worldwide this year compared to $76.2 billion spent by the IT department," IDC said.
This year, the market watcher says that the line of business will spend more than twice as much on application software as IT itself: $150.7 billion to $64.7 billion.
Line-of-business buyers will also spend $120.3 billion on project-related services and $70.3 billion on outsourcing. IT departments, by contrast, will pay out more than double ($149.2 billion) what the lines of business spend on outsourcing -- and only two-thirds as much ($82.2 billion) on project-related services.
In 2017, these two outlays will account for a huge chunk of global IT spending. "Combined IT [and line-of-business] purchases of outsourcing and project-oriented services [approximately $422 billion] will represent nearly one third of all technology spending worldwide," the IDC release said.
The upshot is that shadow IT, long the bane of IT's existence, is legit. IDC's projection that IT spending by the lines of business will reach parity with enterprise IT isn't just unprecedented, it hints at the emergence of a radically different IT model: a New IT, so to speak.