The global technology economy is now the third largest economy in the world with 2016 spending exceeding $6.3 trillion, according to an Apptio study of 25 years of tech spending for more than 3,000 global companies. The tech economy trails behind the U.S. and China and leads Japan by 28% and German by twice as much.
Growth in the tech economy, however, does not necessarily mean comparable growth in the overall economy. IT spending has risen faster than GDP since 2010, according to the report. Additionally, per capita IT spending rose faster than GDP per capita in the same period
Top performers demonstrated technology spending growth up to three times that of other companies and an 8% average annual growth rate from 2010 to 2016 — compared to the global tech economy's 3% annual growth during the same time period. They spent more on IT and, as a result, were 20% more profitable across industries on average. The key to profitability, however, was spending wisely on initiatives to "grow and transform" and not just spending more.
Every company is a technology company, and the size of the global tech economy demonstrates that. Apptio's study expanded measurements of technology spending to support and labor costs, which reportedly account for almost half of general IT costs in the enterprise.
It's a big player game, and companies must either embrace modern tech and swim or neglect it and sink. Swimming, however, is easier said than done.
Technology executives have to balance companies and workforces in the midst of a major transition as technologies like AI fundamentally change business operations. But digital transformation is anything but cheap.
IT is often seen as a cost center, and CIOs have to fight for every dollar they need. At the same time, they are expected to implement large digital initiatives to improve the company's bottom line, drive revenue and keep up with competitors. To fund this, CIOs have to creatively pull from limited budgets while leaving room for "superficial" changes.
Yet modernization can be a double-edged sword. Companies struggling to keep up with the curve often lack the appeal and resources to bring in the necessary talent to drive modernization, thereby leaving the company in its problematic position.
And when companies do manage to put a large digital transition in place, problems occur. For example, Under Armour took a hit in the third quarter because of a bumpy ERP upgrade that disrupted the supply chain and outside vendors and parties.