Gartner has cut its global tech spend forecast by 0.5 per cent to $3.49 trillion in 2016, against $3.5 trillion last year as an economic slowdown and currency fluctuations crimps IT budgets. Bloomberg TV India caught up with Gartner’s Chief Forecaster of Technology and Service Provider Research Group, John Lovelock.

Take us through what prompted the cut in forecast for tech spends…

Well, there were many factors that led into it. Of course, the rising US dollar is a part of the problem. When we convert IT spending in other countries into the US dollar, with the rise of the US dollar, we do get a bit of retraction.

When you break up the IT spends into software and hardware, where are companies cutting IT spending?

It is a little more subtle than just hardware or software. What we are seeing is that companies have shifted from a growth mindset to cost optimisation mindset. What they are doing is that they are tightening the belt from owning assets to having services. So in the software space, instead of holding the licence, they are buying software and services; instead of buying a computer, they are getting computer as a service; instead of doing traditional business process outsourcing they are going for business processing as a service. So the shift in how and when they spend their money is flattening their spending and of course that has the depressing effect on global IT spending.

As global firms go into cost-cutting mode, they tend to spend more on IT to increase efficiency. We haven’t seen that happen really at this point. Is the decision making slowing down?

The decision making is getting back on track. But again, there is one of the shifts that we are also tracking. We are seeing that the spending of IT dollar has shifted from the CIO to the business units. Along with this shift, we are seeing from Mode-I development to Mode-II development as companies take on bi-modal strategies to develop what they need to fulfil their digital business strategy. They are embracing bi-modal, going onto Mode-II, putting dollar spending in charge of the business units, and ramping up the speed at which they develop systems. Now, it is also true that when they are in a Mode-II environment, they are typically spending fewer dollars. The stuff they use to develop the Mode-II is more services-based and typically cheaper, and also brings down some of the spending. Now, there is some growth in our network space, our network equipment is being increased this year as it is being refreshed more rapidly in our support system business. But most of the other areas in the hardware space are seeing great retraction.

What does that mean for companies? Do you see large transformational changes happening within large companies across the board as businesses change what they need from these companies?

Of course, as companies shift from analogue business to digital business, what they were doing has to change. We have seen digital start-ups take over a lot of the market from the traditional players and the traditional players having to react. When they do that, they have to move into the digital business. Legacy modernisation is something we have been seeing for the last few years. It is a trend we continue to expect to see over three-five years. A lot of IT spending, a lot of interest and a lot of backroom activities/methods are getting interesting as cost optimisation is saving money. The saved money is going into the digital business and the Mode-II development.

What is keeping you most excited in the IT world in 2016?

It has to be the digital services twins that have started taking over in any market. Where we used to see assets, pretty much any technology that has been sold in the last 25 years now has a digital service twin. It is changing the dynamics. We have seen software coming in as a service, computers as a service and business process as a service. We will see voice over IP (VoIP) taking over from telecoms and see things like voice over LTE (VoLTE) taking over even in the cellular voice space. It’s getting very interesting on how things are shifting.

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