Worldwide IT spending is forecast to surpass US$3.6 trillion in 2016, a 1.5 percent increase from 2015, according to Gartner.
The IT industry is being driven by digital business, and an environment driven by a connected world, with Gartner predicting that spending on Internet of Things (IoT) hardware will exceed US$2.5 million every minute in 2016.
In five years, one million new devices will come online every hour, claims Peter Sondergaard, senior vice president at Gartner and global head of Research.
Sondergaard says these interconnections are creating billions of new relationships but are not driven solely by data, rather algorithms.
“Data is inherently dumb,” Sondergaard adds. “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 gave examples such as, Amazon’s recommendation algorithm that keeps customers engaged and buying; Netflix’s dynamic algorithm - built through crowdsourcing - keeps people watching; and the Waze algorithm directs thousands of independent cars on the road.
“The algorithmic economy will power the next great leap in machine-to-machine evolution in the Internet of Things,” Sondergaard adds.
“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.”
Digital business is when new businesses designed with both the physical and digital world are brought together.
As analog revenue flatten, and decline for many industries, businesses are shifting to digital revenue from digital business. Global digital commerce is now over $1 trillion, annually.
Sondergaard says leading CEOs have told Gartner that their digital revenue will increase by more than 80 percent by 2020 -125,000 large organisations are launching digital business initiatives now.
For digital business to succeed, Sondergaard believes companies are creating innovation units.
New digital initiatives are running alongside their traditional analog businesses and the business itself is bimodal.
“Organisations are creating separate business units, focusing on digital, separate from their traditional businesses (Mode 1),” Sondergaard adds.
“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.”
Sondergaard says traditional organisations move too slowly when they build digital on old Mode 1 platforms.