Along with the rest of the economy, the IT industry plodded through the Great Recession bringing with it tight corporate IT budgets. A ray of sunshine was Gartner’s July 2014 prediction that total IT spending would “rebound and grow until it reaches a new equilibrium.” One year later Gartner has adjusted their 2015 IT spend growth in constant currency to 2.5% – down somewhat from the 3.7% – 3.9% 2015 projections made in the last two quarters of 2014.
A closer look shows us that the changes are not organizational belt tightening, but more a result of where budget is being allocated. There is a spending shift underway from hardware to software and services, and from infrastructure to the cloud. Rather than buying six new servers and an application to upgrade an existing HR system, organizations are investing in SaaS and cloud solutions.
“As business solutions age, organizations are interested in the cloud and services for their updates,” says Larry Velez, CTO and founder of Sinu, a New York-based IT Managed Service Provider. “Just a few years ago, no one even considered SaaS solutions for things like hedge fund and portfolio management, but they do now.”
The growth of cloud computing in 2015 has been significant. IDC recently reported that total cloud IT infrastructure spending has grown by 40 percent in 2015. This growth accounts for one-third of all IT infrastructure spending with that percentage expected to grow to nearly 50 percent by 2017.
Hand-in-hand with cloud computing’s 2015 growth is an impressive 46 percent growth in IT security spending. Robert Westervelt, IDC Security Products Research Manager confirmed that “the continued double-digit growth of SaaS Web security solutions demonstrates that organizations are increasingly embracing SaaS security offerings to complement their existing on-premises capabilities.” He stated, “Web security products play a key role defending the battlefront where most of the attack activity is taking place.”
How does this translate into resource expertise needs? IT operational budgets are rising at the fastest pace since the Great Recession. The 2015 Computer Economics IT Spending and Staffing Benchmarks study shows 50 percent of the executives surveyed plan on increasing their IT headcount, with healthcare, manufacturing, retail and financial services leading the way.
OnDemand, with over a dozen years spent helping clients deliver results in strategic sourcing is seeing an overall increase in IT sourcing activities as a result of the pent up demand from a sluggish great recession economy. The adoption of the cloud has revolutionized middleware and increased the importance of integration. The changing supply market, with pure cloud suppliers and on-premise players with both cloud and traditional on-premise options competing for share has opened windows of opportunity for clients to address longer term IT strategies and to negotiate actively with incumbent suppliers. OnDemand clients are increasingly looking for experienced IT professionals with an expertise in cloud, middleware and integration solutions, and they are expecting IT procurement resources to bring deep category expertise, supply market insights, and a strategic orientation, not just RFP execution experience.
How is the shift from hardware to software and services, and from infrastructure to the cloud affecting your organization? Are you seeing the same trends? Experiencing similar resource needs? Please take a moment to share your experiences.