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Business units flex budgetary muscles as tech purchasing patterns evolve

Business units flex budgetary muscles as tech purchasing patterns evolve

"Business units are increasingly taking a front seat in technology initiatives by flexing their budgetary muscle."

The share of worldwide corporate IT spending that is funded by non-IT business units is forecast to reach 47 percent in 2019, an increase of more than three percent over 2015.

According to new IDC findings, the new Spending Guide quantifies the purchasing power of line of business (LoB) technology buyers by providing a detailed examination of where the funding for a variety of IT purchases originates.

“3rd Platform technologies such as cloud, mobility, big data, and social business have created the underpinnings for business process transformation and, in some cases, business model transformation,” says Eileen Smith, Program Director, Customer Insights and Analysis, IDC.

“With such high stakes, the line of business units are increasingly taking a front seat in technology initiatives by flexing their budgetary muscle.”

IDC's Line of Business taxonomy identifies two major types of technology spending - projects funded by IT and projects funded by technology buyers outside of IT.

As Smith explains, joint IT projects can be funded by either IT or the functional business unit while Shadow IT projects are funded from the functional area budget without the knowledge, involvement or support of the IT department.

In North America (the United States and Canada), projects funded by line of business units accounted for 58.2 percent or $US324 billion of all corporate IT spending in 2015.

In Europe, the Middle East and Africa (EMEA), 38.1 percent of IT spending came from technology buyers outside of IT while 29.3 percent of IT spending in the Asia/Pacific region was for LoB-funded projects.

Functionality

From a functional perspective, IDC's technology buyer research focuses on twelve purchasing segments.

Industry-Specific Operations, which includes unique industry-specific functions that are required for running day-to-day operations (i.e., manufacturing plant floor, claims processing, etc.) is the largest segment of LoB spending ($252.7 billion worldwide in 2015) but the smallest segment in terms of LoB spending share (45.5 percent).

The two segments with the largest LoB share of IT spending - Supply Chain Management (54.4 percent in 2015) and Customer Service (53.9 percent) - are also the second and third largest segments in terms of spending size.

Much like the regional trend, IDC expects all twelve functional purchasing segments to increase their share of IT spending over the forecast period.

The fastest growing functional areas are Marketing, with a 6.4 percent compound annual growth rate (CAGR), followed by Security and Risk (6.0 percent), and Customer Service (4.8 percent).


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