Total IT spending in New Zealand is forecast to surpass $11.7 billion in 2016 – a 2% increase on 2015 spend.
Opening the Gartner Symposium/ITxpo on the Gold Coast today, Peter Sondergaard, Gartner senior vice president and global head of research, outlined how interconnections, relationships and algorithms are defining the future of business.
Gartner predicts worldwide spending on internet of things hardware will exceed US$2.5 million every minute in 2016. In five years, one million devices will come online every hour.
Gartner says these interconnections are creating billions of new relationships, driven not solely by data, but algorithms.
“Data is inherently dumb,” Sondergaard says. “It doesn’t actually do anything unless you know how to use it; how to act with it.
“Algorithms are where the real value lies. Algorithms define action. Dynamic algorithms are the core of new customer interactions.”
Sondergaard cites examples such as Amazon’s recommendation algorithm which keeps customers engaged and buying, and Netflix’s dynamic algorithm, built through crowdsourcing, that keeps people watching.
“The algorithmic economy will power the next great leap in machine-to-machine evolution in the internet of things,” Sondergaard says.
“Products and services will be defined by the sophistication of their algorithms and services. Organisations will be valued, not just on their big data, but the algorithms that turn that data into actions and ultimately impact customers,” he says.
Sondergaard says Kiwi businesses are also transitioning to a digital business – businesses where both the physical and digital world brought together.
Globally, CEOs say their digital revenue will increase by more than 80% by 2020, and Sondergaard says while progress towards digital business is ‘slightly slower’ in New Zealand, leading organisations are building their digital platform now.
For digital business to succeed, companies are also creating innovation units, with new digital initiatives running alongside traditional analogue businesses – something Gartner terms a bimodal business.
Sondergaard says traditional organisations move too slowly when they build digital on old traditional (Mode 1) platforms. “The solution is to create a type of bimodal organisation, introducing a new Mode 2 platform, with a different emphasis,” he says.
Mode 2 sees companies using more cloud than in-house infrastructure and applications.
“The new platform is less about data gathering and more about intelligent algorithms to act on the data,” Sondergaard says. “Platforms matter because business as a whole has gone bimodal. You need IT that supports a bimodal business.”
He says over one-third of CIOs have gone bimodal just within IT, creating innovation units running at Mode 2 to break out of the traditional slow but stable approach which is Mode 1.
Security needs to change
Sondergaard also outlined how old technology risks are the main concern of risk and security officers, who have become ‘obsessed’ with external hacks, chasing the impossible goal of perfect protection.
“However, 65% of CEOs say their risk management approach is falling behind.”
Because of this, companies are devoting more resources to security and Gartner predicts by 2017 the typical IT organisation will spend up to 30% of its budget on risk, security and compliance, and will allocate 10% of their people to these security functions – triple the levels of 2011.
“You can’t control the hackers. You can control your own infrastructure by using more automation, more outsourcing and more network-based algorithms,” Sondergaard says.
“Simplify your systems. We must move away from trying to achieve the impossible, perfect protection and instead invest in detection and response.”
Sondergaard says the average malware lies dormant, unnoticed for more than seven months before it is activated or detected and IT leaders must become better at sensing these dormant threats.
“CIOs need to rethink their security and risk investments. Gartner recommends that enterprises move their investments from 90% prevention/10% detection and response to a 60/40 split.”