India IT spending to reach $72.3 billion in 2016: Gartner

India IT spending is forecast to reach $72.3 billion in 2016, a 7.2 per cent increase from 2015, according to Gartner.

Gartner predicts spending on Internet of Things (IoT) hardware will exceed $2.5 million every minute in 2016.

“In five years, 1 million new devices will come online every hour. These interconnections are creating billions of new relationships. These relationships are not driven solely by data, but algorithms,” said Partha Iyengar, distinguished analyst and head of research at Gartner India. “Data is inherently dumb. 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.”

Algorithmic economy

The algorithmic economy will power the next great leap in machine-to-machine evolution in the Internet of Things. 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.

“India will continue to be the fastest growing IT market for the second year in succession and will continue growing to total $87.67 billion by the end of 2019,” said Aman Munglani, research director at Gartner. “India is currently the third largest IT market in Asia/Pacific, and by 2019 India will become the second-largest IT market within the Asia/Pacific region, following China.”

Devices segment to grow 9.4%

Devices, which include mobile phones, PCs and tablets, will account for almost 33 per cent of the overall IT spend in India, and the devices segment will grow 9.4 per cent in 2016. Mobile phones will continue to be the single largest technology sub segment in India and the third fastest-growing through 2019.

“Data center systems will grow 3.9 per cent in 2016, with most of this growth coming from enterprise network equipment and servers that will grow at 5.9 per cent and 5.3 per cent, respectively. IT services, which accounts for 18.1 percent of overall IT spend in India, will be the fastest growing segment in India in 2016 with 13.8 per cent growth year on year. Within these segments, business IT services will grow 15.2 per cent over 2015 figures,” said Munglani.

Software growth

Software, which accounts for nearly 7 per cent of IT revenue in India, will grow 12.7 per cent as a segment, but within this segment, enterprise application software will be the fastest growing sub segment in 2016, with revenue forecast to grow 16.2 per cent over 2015. Communication services will continue to account for the largest share of IT spend in India and will account for 39.2 percent of revenue in 2016, however, this will also the slowest growing segment with a 2.1 per cent increase in revenue in 2016.

As analog revenue flattens, and declines for many industries, businesses are shifting to digital revenue from digital business. Global digital commerce is now over $1 trillion, annually.

Digital revenue

“Leading CEOs have told Gartner that their digital revenue will increase by more than 80 per cent by 2020. 125,000 large organisations are launching digital business initiatives now, “said Mike Harris, group vice president at Gartner.

For digital business to succeed, companies are creating innovation units. New digital initiatives are running alongside their traditional analog businesses. The business itself is bimodal.

“Organisations are creating separate business units, focusing on digital, separate from their traditional businesses (Mode 1),” said Iyengar. “They are trying new ways of reaching the customer, of running operations, of driving diverse innovation. They are acquiring and investing in digital technology companies, not waiting on existing suppliers to build capabilities because they have to start in a different place.”

“Traditional organisations move too slowly when they build digital on old Mode 1 platforms. The solution is to create a type of bimodal organization, introducing a new Mode 2 platform, with a different emphasis. The Mode 2 platform uses more cloud than in-house infrastructure and applications, “added Iyengar.

The new platform is less about data gathering, and more about intelligent algorithms to act on the data. Platforms matter because business as a whole has gone bimodal. You need IT that supports a bimodal business. Over a 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.

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