Monday, April 8, 2013

Is the Downward Spiral in Enterprise IT Spending Evidence of IT Innovation at Work?

According to +Gartner (Gartner Research, Inc.), the overall enterprise IT market was predicted to slow down remarkably in 2012 with a growth rate of just 0.3 percent. The cumulative annual growth rate (CAGR) for 2011-2016 is estimated to be just 2.6 percent, with sectors like Government and Education actually shrinking.  (See research article by analyst Vittorio D'Orazio, ID: G00239472, 1 November 2012).

Is this a temporary trend, driven primarily by economic uncertainties left over from the 2008 financial crisis? Or is it a permanent effect on enterprise IT inflicted by innovations in the areas of Mobile, Cloud, and Consumer-driven technology?

Other industries have experienced shrinkage due to innovation. A recent example was presented in an article by +Paul Ziobro and Serena Ng (+The Wall Street Journal, Is Innovation Killing Soap Sales?, 4 April 2013, Pg. B1). According to the article, the introduction of pre-measured pod detergents has actually caused an industry-wide drop in sales volumes by 2.1 percent even though the price per load has gone up by at least 25 percent. Apparently, the end-user savings from efficient use of detergent, albeit at a higher price per load, have translated in lower overall volume of sales revenue for the industry.

Questions to Think About:
  • Will pay-as-you-go models associated with X-as-a-Service offerings end up having the same effects on the IT industry?
  • In other words, will efficient use of IT services by end-users actually drive down the growth of IT?
  • Isn't this the conundrum faced by any other utility and should IT planners and strategists factor this global trend in the long-term strategic plans?
Add a comment and take the poll to the right to express your opinion.