Aussie IT Spending To Reach $80B In 2016, “Algorithmic Economy” Approaches
Gartner has predicted that worldwide Internet of Things hardware spending will exceed US$2.5 million every minute in 2016, and that in five years, 1 million new devices will come online every hour, with these interconnections creating billions of new relationships, driven not solely by data, but by algorithms, too.
“Data is inherently dumb – it doesn’t actually do anything unless you know how to use it, how to act with it,” Peter Sondergaard, Gartner senior vice president and global head of research, commented.
“Algorithms are where the real value lies. Algorithms define action. Dynamic algorithms are the core of new customer interactions.”
Sondergaard used examples such as Amazon’s recommendation algorithm, keeping customers engaged and buying, and Netflix’s dynamic algorithm, built through crowdsourcing, keeping people watching, along with the Waze algorithm, directing 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,” he commented.
“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.”
Leading organisations are building their digital platform now, with businesses moving towards a bimodal model, with new digital initiatives running alongside traditional analogue businesses.
“Organisations are creating separate business units, focusing on digital, separate from their traditional businesses (Mode 1),” Sondergaard commented.
“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 stated traditional organisations move too slowly when they build digital on old Mode 1 platforms, with the solution being to create a type of bimodal organisation, introducing a new Mode 2 platform, with a different emphasis, using more cloud than in-house infrastructure and applications.
“The new platform is less about data gathering, and more about intelligent algorithms to act on the data,” he commented. “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.”
Meanwhile, when it comes to security and risk, Gartner recommends that enterprises move their investments from 90 per cent prevention/10 per cent detection and response to a 60/40 split, while predicting that by 2017 the typical IT organisation will spend up to 30 per cent of its budget on risk, security and compliance, allocating 10 per cent of its people to these security functions, triple the levels of 2011.
“You can’t control the hackers – you can control your own infrastructure by using more automation, more outsourcing, and more network-based algorithms,” Sondergaard commented.
“Simplify your systems. We must move away from trying to achieve the impossible perfect protection, and instead invest in detection and response.”
Gartner states that for CIOs to truly transform they need: a different approach to technology and investment, new digital suppliers, and to create an innovation competency.
“To accelerate the creation of a new digital technology platform, leading companies are acting as venture investors,” Sondergaard stated. “They are not waiting for current suppliers to build digital capabilities. Instead, they are investing in small technology startups. They are buying a stake in their future, guiding their direction.
“Even if you aren’t a CIO technology venture investor, the landscape for the technology buyer will change. If you are going out to buy products and services, you will need new capabilities that most Mode 1 suppliers don’t have, or are struggling to deliver.”
Gartner states new suppliers of digital platforms must be: able to support fast-fail projects; in the cloud, on demand, and highly automated with short-term engagements and pay-as-you-go models; and provide real-time insights with advanced automation.