“Business Technology” Spending In The US Will Grow Faster Three To Four Times Faster Than Classic “Information Technology”
In our research over the past two years or so, Forrester has drawn a distinction between "business technology" and "information technology". Information technology or IT represents the spending on technology goods and services that businesses and governments have been making over the past six decades to run their operations more efficiently and lower business costs. Business technology or BT in contrast is the technology spending to grow revenues by winning, serving, and retaining customers. In earlier reports, we identified the leading technologies that are part of what Forrester has called the BT Agenda (see "Top Technologies For Your BT Agenda"). Today, we have published our report that sizes US spending on BT (see "Sizing The US CIO's Business Technology Agenda — Business Technologies Will Grow Faster Than Information Technologies And Will Exceed Half of New Project Spending").
Here are our key findings from this exercise:
- BT technologies are more than just the front-office systems for sales and marketing. They also include software and services for developing new products, handling and fulfilling orders, serving customers, and acquiring the human and partner resources for doing this effectively.
- IT technologies will continue to be over 70% of total tech spending through 2017. Spending on information technology over decades has created a legacy of tech maintenance and operations spending, and firms still need to keep these core systems running.
- But BT spending will grow more than three times as fast as IT spending. CEOs are turning on the green light to increase spending on technologies that will help them grow revenues through customer focus, As a result, spending on BT will grow at 10% to 12% rates through 2017, while spending on IT will grow at 2% to 4% rates.
- In new project spending, BT purchases will exceed IT purchases starting in 2014. Every firms' technology budget has two parts: 1) new project spending, and 2) spending on ongoing operations and maintenance and replacement or expansion of systems. (Forrester calls the latter "Tech MOOSE," which is an acronym for spending to maintain and operate the organization, systems, and equipment.) Typically, the former represents 25% to 30% of a tech budget (as measured on a cash-outlay basis without depreciation of past capital investment), while Tech MOOSE will be 70% to 75%. Accordingly, it is not surprising that new project spending for the BT agenda will take the majority of new project spending, given the importance being given by CEOs, CIOs, and other business executives to these projects for winning, serving, and retaining customers.
- But BT new projects are creating a fast-rising trail of ongoing ops and maintenance spending. Cloud applications and cloud platforms that support these applications are a large part of the portfolio of BT software. Unlike the licensed software products that traditionally dominated IT spending, the subscription pricing model of cloud applications reduces the upfront spending counted in new projects, but increases the follow-on spending that is included in ops and maintenance spending. As a result, while the BT portion of Tech MOOSE was just 18% in 2013, it will rise to almost 25% by 2017. A major challenge for CIOs and their business partners will be keeping these costs under control.