The new digital industrial economy will have a massive impact on major technology vendors. This in turn will create both exciting new opportunities and intense challenges for CIOs.
Most vendors will need to radically transform their offerings to remain competitive and relevant to their customers, many of whom will also digitalize their offerings in order to succeed. The pace of this change will be at the speed of digital and, as a result, we predict that many of the vendors that are on top today will be fighting for their lives tomorrow.
Why? Let’s take a step back so that we can see the future a little more clearly.
The top technology companies have reigned over the industry for long periods — a decade, sometimes even longer. But what they sold you in the past, and what they are selling you today, is not what you will need for the digital future.
On top of this, vendor channel strategy, sales force and partner ecosystems are being challenged by different competitors, new buying centers and changed customer business models. To add fuel to the fire, digitalization is creating accelerated technology-driven startup environments around the globe.
We know that most suppliers don’t dominate from one generation of IT to the next. Many of the vendors that are on top today, like Cisco, Oracle and Microsoft, will need to change radically if they are to retain their market leadership in the new digital industrial economy.
CIOs can see this coming. They tell us they expect different vendors to lead the next wave of innovation. Our latest CIO survey, the results of which are currently being analyzed for publication in early 2014, show that two-thirds of CIOs expect to change their primary suppliers by 2017.
Let me say that again: Two-thirds of CIOs expect to change their primary suppliers by 2017.
But there is some good news for vendors. CIOs will be spending more, not less, on technology in the foreseeable future. The challenge for vendors will be to offer products and services that meet customers’ new requirements, not fighting for a shrinking slice of a withering pie. For the year ahead, Gartner reports that the IT market is growing at a modest 3.2% annual growth rate. In two years, the combined IT and telecom market will hit nearly $4 trillion, or roughly 5% of World GDP.
Looking more deeply at IT spending, a couple of things that are important for CIOs and vendors alike stand out.
First, consumer technology spending is outstripping business and government technology spending. Annual spending on consumer devices will be four times that of business and government.
Mobile smart devices have taken over the technology world. By 2017, new device categories such as mobile phones, tablets and ultramobile PCs will represent over 80% of device spending. In fact, by 2017, nearly half of first-time computer purchases will be a tablet. To put this into context, this category barely mattered a decade ago.
So mobile will be your destination platform for all applications.
Second, the way CIOs need to look at data centers is also shifting. Right now the data center market capacity is about 80% private, meaning the servers and infrastructure in your data centers. That will shrink to 65% in just four years.
We are firmly in the era of cloud operations and the approach for private data centers has changed. About 20% of spending will be on hyperscale systems, using the model that the global cloud leaders like Google and Amazon pioneered, delivering massive scale.
Change is inevitable. We believe that accelerated vendor leadership changes are on the near-term horizon. These new leaders will drive a fundamental shift in the strategy of their organizations. As a result, CIOs will need to prepare — at least half of the strategic vendor relationships they have today will be with previously unimaginable new partners in the future.
We’ll talk more about these issues at Gartner Symposium/ITxpo in Barcelona, Spain next week. Will we see you there?