What do Amazon, Alphabet and Walmart have in common? The world's largest IT budgets
Companies prioritizing internal tech investments send a signal to investors, employees and the public: They're innovative.
Unrivaled success often pushes companies outside their industries to experiment in new markets with different competitors.
Amazon is the perfect example. After permanently changing the landscape of online retail, Amazon is now "building the backbone of modern internet," said David Lantsman, IDC research manager for customer insights and analysis, during Worldwide IT Wallet webcast from August.
With two industries sitting under the giant umbrella that is Amazon, the company has secured its spot as the "top commercial technology spender in the world," spending $13.4 billion in 2018, according to IDC's Worldwide IT Wallet report for about 4,800 of the world's largest enterprises.
- Alphabet, Google's parent company, ranked second after spending about $12.4 billion.
- Walmart spent about $11.7 billion.
- Microsoft spent about $9.5 billion.
- JPMorgan Chase spent about $9.4 billion and rounded out the top five IT spenders.
Companies like Amazon and Alphabet own numerous businesses across industries, but their growth introduces potential friction and conflicts of interest. Aggressive IT is almost always rewarded in the stock market, but customers may need more convincing.
Total spend is about $1.6 trillion in 2018 for large and very large businesses, or those with 500 to more than 1,000 employees, according to IDC. The spending includes investments in hardware, software, IT services, telecom services and internal staffing.
Retailers are top spenders
The industries spending the most on IT were retail, tech and finance.
Amazon has long said its retail business and cloud business operate in silos, though the No. 1 cloud provider has struggled to prove that to reluctant customers.
"Everybody is concerned about Amazon, and you would have to have your head stuck in the ground not to be," said Lantsman, in an interview with CIO Dive.
Of the approximately $13.4 billion Amazon allocates to IT, IDC projects about $10 billion is dedicated to hardware, namely servers, storage and networking systems to "maintain and build out capabilities of AWS."
Though Amazon is an easy target for retailers, Alphabet, Google Cloud's parent company, has to also make a case for its business silos. Companies are concerned that Amazon's retail business could leverage data stored in AWS. Likewise, businesses don't want to feed Google Cloud data that could aid Google's ad business.
Finding a cloud provider without a perceived conflict of interest is becoming a legitimate concern for companies. Microsoft's traditional tech vendor reputation shines as a strength against competitors.
"We are primarily a tech company, so the data is not used in pursuit of any other interest," said Alysa Taylor, Microsoft corporate VP of Business Applications and Industry, in an interview with CIO Dive earlier this month.
Companies want "a technology provider that doesn't intermediate their data," said Taylor.
But Amazon and Microsoft aren't the only ones using a bulk of their IT budget on cloud expansion. There is "seemingly endless amounts being spent by the big tech companies building out their cloud computing platforms," said Lantsman.
Even Facebook, which ranked seventh on the Worldwide Wallet list spending about $8 billion in 2018, is "also spending a ton, but to a lesser extent than the others as their infrastructure is all for internal use," he said.
Good IT doesn't make a tech company
Beyond the cloud, IT spending is indicative of a larger picture. Companies that are allocating hefty funds to internal technology sends a signal to investors, employees and the public: They're innovative.
The "tech" or "IT" label for spending boosts a company's market perception, making them look more like a Silicon Valley darling. But simply appearing to operate like a tech company is different than actually acting like one, which includes agile methods, strong analytics and DevOps.
Walmart is the third-largest spender on IT, behind two giant tech companies. But when the company could stand to lose about $20,000 every 30 seconds its website is down, IT has to be a top priority.
As the largest retailer in the world, Walmart's IT strategies are aggressive. CIO Clay Johnson encourages a fail fast experimentation strategy among his team, which is modeled to work in a "startup orientation," Walmart CTO Jeremy King, told CIO Dive in an interview in September.
Walmart and Microsoft have had a very public partnership, even expanding the retailer's technology center to create a team comprised of engineers from both companies. Walmart is a Microsoft Azure customer, and the team is expected to innovate in internet of things, computer vision, big data and real-time analytics. All of this falls under Walmart's big picture IT budget.
Security is also a major theme in IT investment as companies could lose nearly 3% of their revenue growth within five years because of cyber incidents. Even as more pressure is put on IT to grow and experiment, it still leaves a majority of CEOs concerned about the "unstable" nature of internet security.
Though market expansion and competition appear to be the instigator of growing IT budgets, security is at the forefront of every IT-related decision.
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