Given today’s fast-evolving technology market, the assertion that digital disruption is leading to potent increases in IT spend across the board is a bit like telling a fish that water is wet; it’s not news to anybody even marginally involved in the local enterprise technology landscape.
Dive a little deeper into the pond however, and trends in how technology investment is increasing - where the greatest amount of new spend is going, how it is being allocated, and where it is growing most rapidly - reveals a great deal about just how industry is evolving thanks to technological change.
IT investment continues to grow. At the same time, the organisational level at which technology buy-in is decided has been ascending, with business executives increasingly displacing IT executives as primary technology buyers.
These factors present a new and changing landscape to partners, filled with emerging opportunities.
According to Gartner, enterprise IT investment across all industry segments in Australia is predicted to grow by almost two per cent during the course of 2015-2016, to $US80.3 billion for the year.
Globally, the figure for this year alone stands at about $US2.4 trillion, according to fellow research group, IDC.
IDC’s research suggests that, by 2020, worldwide revenue from IT products and services is set to hit $US2.7 trillion or more, representing a compound annual growth rate (CAGR) of 3.3 per cent over 2015-2020.
Big industry areas such as financial services and manufacturing are slated to see positive momentum in IT spend, according to IDC’s forecast, especially where companies are spending more on so-called third platform technology, such as cloud, mobility, and big data.
Meanwhile, banking, discrete manufacturing, process manufacturing, and telecommunications comprise the industries with the largest IT spend.
Combined, they are also expected to generate close to a third of worldwide revenues over the period of IDC’s forecast to 2020.
Healthcare is set to retain its crown as the fastest-growing industry sector, with five-year CAGR of 5.7 per cent over 2015-2020, while banking, media, and professional services are expected to, as a group, experience a CAGR of around 4.9 per cent for the period, to more than $US475 billion in 2020.
“While the consumer and public sectors have dragged on overall IT spending so far in 2016, we see stronger momentum in other key industries including financial services and manufacturing,” IDC customer insights and analysis vice president, Stephen Minton, said.
“Enterprise investment in new project-based initiatives, including data analytics and collaborative applications, remains strong, and mid-sized companies have been especially nimble when it comes to rapidly adopting third platform technologies and solutions.”
Closer to home, Gartner has identified the combined communications, media, and services sector as the highest-spending market vertical in Australia - this is followed closely by manufacturing and natural resources, and the banking and securities sectors.
However, the fastest-growing segment for technology spending in Australia this year is set to be the utilities sector, according to the industry research company.
These figures are not surprising. Every industry sector, according to Gartner, has embarked on digital technology adoption as a response to internal pressures to transform.
This is in addition to changing demands and expectations among end customers. It should be noted, however, that the pace of change among differing industry verticals varies dramatically.
“The pervasiveness of technology in all industries, some more than others, has made it crucial to focus on IT spending across verticals,” stated Gartner in its Forecast Overview: Enterprise IT Spending Across Vertical Industries report.
Most importantly, Gartner believes that IT buying is moving well beyond the back-end, and now involves the business and department users alongside the chief information officer’s (CIO’s) office.
“Our research shows more than half of employees in current line of business are involved in IT procurement process, which implies that sellers now need to craft messaging that resonates with these new influencers and buyers,” Gartner reported.
Far from creating havoc for partners in the channel, this trend may, in fact, be a force for good, with resellers in a position to make the most of the new, evolving dynamic.
According to Gartner, having a “verticalised” market strategy is strongly correlated to gaining greater access to business buying centres in targeted vertical markets.
“Successful vertical differentiation is a business and operating model choice, not a marketing choice,” Gartner reported. “Not all technology providers will benefit from greater verticalisation, but the approach adopted needs to be a considered decision.”
Never one to miss an opportunity, Gartner has, of course, formulated a framework that technology providers can use to help tackle industry verticals.
According to its ‘Vertical Strategy Framework’, Gartner recommends five clear postures that partners can choose between to help gain traction in a chosen industry sector: industry aware; industry entrant; industry associate; industry peer; and industry influencer.
Within this framework, Gartner suggests five parameters that help to determine the business and operating model decisions that comprise a vertical strategy.
These include organisation, segmentation, targeting and positioning, product development, sales and distribution, and service and delivery.
While Gartner’s recommendations may, at first glance, appear somewhat convoluted, the long and short of it for partners is this: providers should understand the business decisions that drive technology investment in the enterprise, position themselves to exploit that knowledge, and implement a strategy to tap into today’s business needs.
“Adopting a vertical-market approach forces providers to consider their offerings in a business context, and provides an opportunity to help their clients drive competitive differentiation and achieve industry-specific business goals,” the Gartner report said.
No doubt, most partners already have some form of vertical strategy built into how they do business.
The trick, according to Gartner, is in how partners go about identifying the opportunities and formulating a plan to take advantage of them.
As outlined during the October issue of ARN, four technology resellers operating in Australia are making a point of focusing on particular industry verticals - a strategy that has resulted in dividends.
For Deloitte, the public sector plays a big part in the work it does within Australia, while the education sector is a regular customer for KPMG, with the company making a point of ramping up its focus on the vertical.
At the same time, the financial services sector is an important revenue driver for The Missing Link. Likewise, BEarena has seen lucrative opportunities abound from the healthcare sector.
It’s not so much that these companies have chosen just one vertical on which to focus. They haven’t. Rather, they have taken the time and effort to get to know certain verticals well, building on the strengths needed to become leading players within particular industry sectors.
As IT investment decisions continue to migrate from the IT office to other departments within the enterprise, vertical specialisation helps partners to develop a new lexicon, a greater understanding of business needs, and a more refined view of how to develop solutions to meet them.
This article originally appeared in the October issue of ARN magazine - to subscribe, please click here
