If you are based in Australia, the chances are your company will be spending less on personal computers, laptops, tablets, and mobile phones in 2019, according to a recent report by research firm Gartner. However, companies in the country are projected to increase their expenditure on enterprise software by 10.4% to AUD 15.9 billion ($11.6 billion), up from the projected AUD 14.4 billion ($10.5 billion) in 2018 and AUD 13.3 billion ($9.7 billion) in 2017.
This means that enterprise software will experience the highest growth across all categories of IT spending next year. The category includes application software such as enterprise resource planning, customer relationship management, collaborative and personal applications (real-time team collaboration, email, e-learning), and infrastructure software primarily used by IT professionals such as client-server tools, database management, antivirus and firewall, and operating systems.
The report added that Australia is exhibiting the growth and spending patterns of a country shifting quickly to digitisation, despite lagging behind the US by six years in cloud spending as a percentage of total enterprise IT spending.
Other categories included in the report are data centre systems, IT services, communication services, and devices. Spending is forecast to increase by 1.2% for communication services, 2.3% for data centre systems, and 4.4% for IT services, while spending on devices will fall by 1.6%. Total spending on IT products in Australia is projected to hit AUD 93 billion ($68 billion), a 3.5% increase from 2018 and slightly higher than the global average growth rate of 3.2%.
“While currency volatility and the potential for trade wars are still playing a part in the outlook for IT spending, it’s the shift from ownership to service that is sending ripples through every segment of the forecast,” said John-David Lovelock, research vice-president at Gartner, in a news release. “What this signals, for example, is more enterprise use of cloud services — instead of buying their own servers … As enterprises continue their digital transformation efforts, shifting to ‘pay for use’ will continue. This sets enterprises up to deal with the sustained and rapid change that underscores digital business.”
Rob Malkin, vice-president of Australia and New Zealand for Commvault, a data backup and recovery software provider, said: “It’s a capital expenditure model versus an operational expenditure one, the way companies want to spend and ensure that they can have the latest [and] greatest technology.” In a capital expenditure model, companies invest in buying software and infrastructure as assets, while under the operational expenditure model, companies lease software on subscriptions. This trend is driven by the availability of cloud-based software, which is becoming increasingly mainstream.
Kesara Jayasuriya, ACMA, CGMA, a director at One Investment Group (OIG), an operations service provider for fund managers, said that companies in Australia’s financial services sector are focusing on digitising their operations.
“In Australian financial services, specifically in the fund administration space, [we have] used legacy systems that are mostly server-based and built many years ago. They are clunky, inflexible, and didn’t achieve the desired outcomes,” said Jayasuriya. “Across the industry, we could see companies work around their core systems to get their work done.”
He added that the desire for digital transformation at OIG is also a shared sentiment in his industry. “Most are looking for cloud-based, virtual office potential, and the ability to be flexible so you can change things faster and the way you want [it],” he said.
On the subject of subscription-based enterprise software, he said four- to five-year contracts were common in the past, but this has changed because of newer and better tools in the market. “We could see that there are many new tools in the market; mostly fintech-type tools, cloud-based, cheaper in cost, easy to set up, and extremely efficient. We are always looking at what is available in the market to take us to the next level in automation.”
Five-year contracts will not be the option of choice going forward, he said. The reason is simple — companies are looking for agility.
“Tools with subscription-based models, which are quite common now, are very flexible, easy to move out of, and are less reliant on a vendor help desk to troubleshoot issues,” Jayasuriya said. For a cloud-based solution, all users on the platform typically have access to the latest and most up-to-date version of the system, resulting in early bug detection and quicker response times.
For OIG, spending on enterprise software is projected to increase by 10% or more in 2019 compared to the year before, Jayasuriya said. However, he said that increased spending on enterprise software may be offset by reduced staffing costs.
“We need to spend more money on the systems side, but we will have fewer people. Investment in automation and digitisation is the way forward,” he said. “Our expectation is for systems to perform most of the repetitive processing and our staff to perform more value-added work. This is the space we’re most focused on.”
Malkin sees this trend in Commvault’s business, where many financial institutions in Australia are moving data, such as email, to the cloud and keeping higher-impact data on premises.
“Customers are saying to us, ‘With all the cybersecurity hacks in the world, just make sure that our data is not just protected but readily available, that we can back it up and make sure that the critical data is always there 24/7 for us to get access to,’” he said.
— Alexis See Tho (Alexis.SeeTho@aicpa-cima.com) is an FM magazine associate editor.