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EMEA enterprise IT spending to drop 1.4 p.c.

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CIOL Bureau
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MUMBAI, INDIA: Enterprise IT spending in Europe, the Middle East and Africa (EMEA) will reach €604 billion in 2011, a 1.4 per cent decline from 2010, according to Gartner, Inc.

Euro-based enterprise IT spending in the region will grow by 2.3 per cent in 2012. Western Europe will continue to slow EMEA growth through 2015, the research firm said in a statement.

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“The second recession is about to hit and CIOs must decide which way to turn,” said Peter Sondergaard, senior vice president and global head of Research at Gartner.

“The continued global economic uncertainty and the eurozone crisis will impact your (CIOs) IT budget in 2012, and your business will face difficult budgetary questions. Your choices will depend on which geographies you operate in, your industry, and the strength of your organization when the economic storm arrives,” he added.

The outlook for enterprise IT spending growth in EMEA has been hit by the prospect of sharply lower economic growth in the mature economies of Western Europe. Austerity measures brought in to deal with the sovereign debt crisis will curtail government spending on IT in particular and hinder economic growth, which will result in lower demand for IT products and services from businesses.

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Western Europe, which accounts for 80 per cent of EMEA enterprise IT spending, will see enterprise IT spending in euros decline by 1.8 per cent in 2011 and grow by only 1.5 per cent in 2012. Government (including education) IT spending will account for the largest share of Western Europe enterprise IT spending in 2011, at 20 per cent of the total.

Gartner predicts that this sector will decline by 4.8 per cent in 2011 and 1.7 per cent in 2012, and that it will not recover to the level seen in 2010 until 2015.

Sondergaard continued, “CIOs must build a realistic budget right now to lead from the front, irrespective of market growth. By 2014, CIOs will have lost effective control of 25 per cent of their organization’s IT spending, and by 2017, chief marketing officers may have a bigger IT budget than CIOs do. It is time for CIOs to take the lead and reimagine their role.”

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The Gartner senior vice president identified three things that CIOs must do: adopt a post-modern approach to business, pursue simplicity and employ 'creative destruction'.

First, they must adopt a post-modern approach to business, a business centered on the customer and fuelled by the explosion in information, collaboration, and mobility enabled by the cloud. In EMEA, Gartner estimates that €16 billion will be spent on public cloud services in 2011, representing about 3 per cent of EMEA enterprise IT spending.

This figure is estimated to reach €20 billion in 2012, and public cloud services will grow more than 10 times faster than overall IT enterprise spending in EMEA through 2015.

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Second, as business gets reinvented and becomes highly dynamic, IT leaders must change their systems in order to deliver simplicity to their customers and employees. To create simplicity CIOs need to put customers and their needs at the centre of design and make the user experience simple by building context-aware solutions.

The demand for simplicity has been bolstered by the shift to mobile technologies, and context-aware computing is also assuming greater importance.

Third, IT leaders must embrace creative destruction to eliminate legacy technologies, selectively remove low-impact systems and take calculated risks to employ new solutions, the effects of which will threaten or eliminate the old.

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Although IT departments are thought of as excellent service providers for the business, IT leaders need to be less service providers and more leaders. “Whether or not they realize it, their business partners need their leadership in order to achieve the best business outcomes,” Nunno said.

“At the same time, they want IT to be inexpensive, secure and reliable. We recommend that CIOs apply the concept we call ‘Pace-Layered Application Strategy,’ a technique that helps IT leaders make decisions about what assets in their portfolio are candidates for creative destruction. IT leaders who embrace this paced concept to IT change become more adaptable and responsive to business change. It helps them see opportunities where some see only threats. It also helps them break down barriers, create customer intimacy and build stronger partnerships.”

Gartner maintains that IT leaders must stop being perfectionists and embrace calculated risks to surprise both their own business and their competitors. “This is not the time to retrench. Great IT leaders know how to manage risk,” said Sondergaard.