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Lines of business overtaking IT department as spenders on tech

IDC has indicated that next year will be a turning point in the way funds are spent on IT and that will have ramifications for the channel

The channel has been dealing with changing customer buying patterns for a couple of years but those traditional contacts in customer IT departments face being overshadowed by other purchasers.

IDC is forecasting that as soon as next year technology purchases funded by line of business purchasing will overtake spending from IT departments.

Digital transformation is driving the change with the analyst house expecting $1.67 trn to be spent on technology this year with 50.5% coming from the IT budget and 49.5% being spent by lines of business.

But line of business spending has been growing at a faster rate and between 2016-21 will come in at 6.9% a year, compared to 3.3% for IT spending.

IDC has looked at the impact of changing buying patterns in vertical markets and concluded that by 2021 only construction and telecommunications will see tech spending led by the IT department.

"As business functions worldwide embrace 3rd Platform technologies to accelerate time to market, enable new business models, and increase revenue, leaders within these functions are looking to drive decision making and manage the budget of these investments," said Eileen Smith, program director, Customer Insights & Analysis at IDC.

"On average, worldwide line of business functions will fund 50% of their total technology purchases in 2018, but with the ease of cloud software, business functions on average will fund an astounding 70% of application investments this year," she added.

From a channel perspective the money will be being spent by lines of business on consulting services, business processing outsourcing and project-orientated services.

The IT department will continue to spend on outsourcing, project-orientated services and networking equipment. Both will spend on cloud but more will be spent on IaaS outside the IT office.

"In Western Europe, LOBs will accelerate their investments in technology, particularly in the cloud software space. Business managers are becoming more independent, relying less on IT departments to purchase applications or devices. Business-funded spending will experience 6% growth in 2018, four times faster than that of IT departments, showing that many European companies are more exposed to shadow IT spending," said Andrea Minonne, research analyst, Customer Insights & Analysis in Western Europe at IDC.

The growing importance of lines of business has been a theme in the channel and recent research from CompTIA revealed that the 45% of the ideas were now coming from outside the IT department and more than half of those firms that were quizzed had used business unit budget to pay for technology purchases last year.

The industry lobby group found that more than a quarter of final decisions about which projects got the final sign off were now being taken without the final nod from  the IT department. Some of the places that were now exerting influence were finance, marketing, sales and logistics.

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