A global survey of more than 2,500 business and technology leaders conducted by the research firm ESI ThoughtLab, on behalf of Cognizant, a provider of IT services, suggests that the amount of money organizations are willing to invest in IT as a percentage of revenues has substantially increased. This is mainly thanks to the rise of various digital business transformation initiatives.
On average, the survey finds that organizations are now spending 10 percent of revenue on IT. A few years ago. that percentage would have been well below 5 percent. More compelling still, the spending on IT as a percentage of revenue will, on average, increase to nearly 16 percent over the next three years.
Considering the total revenue of all respondents, Cognizant estimates the average company in this study is spending roughly $837 million on technology this year, which would rise to $1.3 billion in the next three years.
Investments are paying off
Obviously, the Cognizant study is weighted toward enterprise customers. However, it provides proof that organizations are significantly increasing their investments in IT as they embrace digital business transformation. They do this to remain competitive in what is starting to be known as the fourth industrial revolution.
Those investments appear to be paying off. On average, survey respondents report that they have been able to cut overall costs to the business on average by 2.3 percent over the past year. The survey also suggests net benefits from these investments lead to, on average, 9 percent growth in revenue.
It’s now only a matter of time before that same increase in spending starts to occur across the small-to-medium business (SMB) sector. In fact, as enterprise IT organizations modernize processes by embracing DevOps and continue to invest in next-generation applications based on microservices, there may come a day when enterprise IT organizations are more agile than SMB rivals that continue to rely on legacy application platforms.
Where investments are being made
More than 77 percent of respondents identified cloud computing, mobile, and cybersecurity as the three areas where they have reaped moderate or high returns on investments. The next three areas cited are Internet of Things (IoT)/wearables, robotic process automation (RPA), and data analytics.
Specifically, 60 percent of organizations that have made moderate or substantial investments in data management (60 percent) have realized moderate to high returns.
Naturally, not all this increased spending on IT is manifesting itself in a budget controlled by the internal IT team. Most of the increased spending on IT is likely to manifest itself in budgets controlled by the various lines of business that make up the organization. The challenge IT services organizations now face is making sure they are close enough to the business to tap into those opportunities without unnecessarily antagonizing internal IT teams.
Business leaders have never had a greater appreciation for the business value of IT. The issue IT service providers will need to address next is which of its customers are most likely to thrive in this new era of industrial revolution. After all, as goes the opportunity for business growth for customers, so too does the prospects of the IT services provider.
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