IDC: Internet Of Things Adoption Spurring Line-Of-Business Spending On IT

Line-of-business technology spending will be nearly equal to spending by companies' IT organizations by 2020 – in part because of the Internet of Things, according to market research firm IDC in a Thursday report.

The digital transformation that the Internet of Things presents for companies, such as reduced downtime and increased efficiencies, are causing the line-of-business organizations within companies to focus more on IT, said Naoko Iwamoto, senior market analyst with the IDC Japan IT Spending Group.

"Companies' adaptation of innovation accelerators, such as Internet of Things, AI systems and 3-D printing … to both new product and service developments and day-to-day business operations has fundamentally increased line-of-business spending on IT," he said.

[Related: Up Against The Clock: Solution Providers Need Patience For Longer IoT Sales Cycles]

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IDC forecasts that line-of-business spending will have a compound annual growth rate of 5.9 percent through 2020, while technology spending by IT buyers will only grow by 2.3 percent by 2020.

According to IDC, technology categories such as applications, project-oriented services and outsourcing will see the most spending from line-of-business buyers in 2017. Application development and deployment is a large area of investment for this side of the organization, said IDC.

Solution providers deploying Internet of Things solutions said they need to revamp their sales teams to tighten focus around the line-of-business side for customers.

"We're seeing the opportunities we're engaged in coming from the line of business, so that's great in some ways but really challenging in others," said Michael Lomonaco, director of marketing and communications at Open Systems Technologies, a Grand Rapids, Mich.-based systems integrator. "That organizational complexity is one of the more challenging areas of IoT – while these folks may sit on the same floor, they don't necessarily collaborate or integrate, or even speak the same language. We want to serve the business, and also the idea of IT and the business working together in a truly collaborative nature. And that can be a real challenge."

Lomonaco said that Open Systems Technologies appealed to its customers' line-of-business organizations by assigning both sales reps and principals – or subject matter experts with vertical market expertise – to different customers. The company then created an engagement model framework to make sure that the sales reps and principals understand each other's needs and values with each project.

"The enterprise technology side of our business is more focused on the data center, managed services, product, infrastructure, the whole as-a-service model. The business transformation side is focused around our custom app dev, our design strategy. Now we're seeing those two areas come together because IoT is really pushing that," he said.

In 2017, IDC expects line-of-business technology spending to be larger than IT organization spending in five industries: discrete manufacturing, health care, media, personal and consumer services, and securities and investment services.

"The innovation accelerators have put the line-of-business units in the frontline of the digital transformation and have forced them to work either alone with the ecosystem outside of the IT organization … in closer collaboration with the IT department than ever before," said IDC's Iwamoto.