Kathy Gibson reports from Gartner Symposium – Mobile, cloud, social and information has reshaped IT forever, and this nexus of forces has given rise to the digital business.

This is where the virtual and physical worlds come together via the Internet of Things, says Peter Sondergaard, senior vice-president: research at Gartner.

Not only is the digital business redefining IT and the markets, but it’s also having a profound effect on human beings, he says. “It affects your job, it affects your workforce and it affects your entire future,” he says. “Make no mistake, digital business is becoming a reality, and is merging the virtual and the physical world together.”

As a result, Sondergaard says, we are experiencing he establishment of digital processes and business models leading to the realisation of the digital business moment both in commercial enterprises and the public sector.

“Every company is truly a technology company, and digital business changes both IT leadership and the IT market itself.”

The Internet of Things is becoming pervasive in an environment where just about every object with that can be instrumented will be, and where almost every object with a value over $100 will have a senor built into it.

“What’s important is that humans are also changing,” Sondergaard says. “As IT leaders we have spent decades convincing people that technology is the business, and that it will help create new business. Often these pleas fell on deaf ears. But finally people have taken up the cause and now consumer behaviour and human behaviour has changed. And this changes our businesses.

“Today, people spend more time in the digital world than they spend sleeping – you could call that digital first. Customers will engage with your products in the digital world long before they engage you physically. So the customer experience fundamentally changes in the digital business.”

Sondergaard points out that while companies now have digital customers, they also have digital employees. “The typical person carries several device at all time. The typical employee twice as many,” he says. “Remember that your digital employees are digital customers as well and they want to use what they use at home. So put the systems in place to connect digital employees with digital customers – let them choose their modes of collaboration then get out of the way.”

In the new digital industrial economy, the CIO’s job and his relationships with the rest of the business are changing.

“Fluid change is swirling all around you,” Sondergaard says.

This raise the big question that bothers IT leaders: who is in control of this new environment?

IT spending around the world is set for slow growth, at just 2,1%. While Europe will be flat, Africa is expecting 5,4% growth in 2014.

Rather more interesting is the fact that the global IT services market will hit $1-trillion this year – and the really interesting information is that half of that figure will be spent outside of the IT organisation.

“Today, 38% of IT spend is outside the IT organisation already and, in South Africa, it is already 48%,” Sondergaard says.

Driving this spend is a rapid decrease in the cost of cloud services and more fluid pricing.

“By 2018, businesses will only own half of the world’s server computing capacity. Integrated systems that are purchased as a bundle will already count for 28% of spending next year.”

With software moving rapidly to the cloud, Sondergaard warns that core ERP systems may have left it too late.

“Cloud-based CRM will reach 50% of implementations by 2016,” he says. “ERP will get there by 2015 which, in fact, may be too late. It takes 10 years for an ERP system to be fully rolled out. This is not the model for a fast-moving organisation; you cannot base a digital business on this.”
Increasingly, this means that the areas of IT spend that the CIO is in control of are not the areas that are contributing the new digital business.

With the growth of the Internet of Things, however, he believes the CIO needs to get back in control as security and manageability will be more important than ever. “A typical business will have 1-million IP addressed to manage by 2018,” he warns.

As the digital business model takes off, Songergaard says that IT organisations need to start acting more like the business units within their own companies – and these business units, which are spending 28% of IT budgets today, are increasingly starting to look like technology start-ups.

“To do this, you have to do three things: re-invent your IT budget through new technologies, thinking and acting like a start-up; refocus the priorities of the IT organisation and the CIO’s role; and reskill the IT organisation and play the advisor of the technology reskilling of the entire organisation.”