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Digital Business

Every business will be digital: Can tech leaders make the turn?

ORLANDO — There are so many references to smart machines, digital business and enterprise upheaval at the Gartner Symposium/ITXpo that you almost expect half of the executives in attendance to be replaced by algorithms and robots on the spot.

Maybe next year.

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Welcome to Gartner's big theme for 2015: Every business will be digital and that includes a heavy dose of smart machines that'll augment and eventually replace humans. Enterprises will market to virtual digital assistants that'll shop for you, build business around algorithms and create more fluid technology systems.

"Businesses and governments must build and design for a world that is digital first," said Gartner research chief Peter Sondergaard. These entities will target so-called digital humans.

"Human behavior is changing. Digital behaviors permeate if not dominate our lives. As soon as we wake up, here comes the screen for the first digital moment of the day," said Sondergaard. "Nothing else gets more attention than our screens. We are becoming digital first."

Add it up and businesses will have to bring those first digital moments to consumers to engage.

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As noted in previous years, Gartner's powwow for chief information officers and tech execs is part scene setter for the year ahead, part therapy session for that never-ending IT alignment issue and part sales pitch for Gartner services. Last year, Gartner's theme was the "nexus" created by the Internet of things, social, mobile and cloud.

In the end, there's a solid agenda for CIOs to ponder — even though many of them are burdened with the conflicting goals of innovating and cost cutting. Tech leaders have to be rock solid for the core of the business and then have to transform to embrace digital business and take risks. Good luck with that balancing act. Daryl Plummer, Gartner analyst, said that tech leaders will need to develop two personalities — one that is rock solid and another one as a digital gunslinger.

Sondergaard said structural changes in business and IT are underway and will create "new business designs" and change how "businesses and processes work."

"Practically everything that can be instrumented will be," said Sondergaard, who said enterprises will spend $40 billion in the next year to become digital businesses.

Where's the most upheaval? Sondergaard said asset heavy industries and traditional businesses. The challenge: Business leaders won't spend because digital business hurts margins, but survives long term. "The initial business focus will naturally be on margins and user experience," said Sondergaard. Those early wins will give CXOs credibility to drive revenue in the future with digital transformation projects.

Sondergaard cited Siemens, Caterpillar and Saxo Bank as examples of traditional companies making the digital turn. "Every company is a technology company," said Sondergaard. As the shift occurs, power structures, IT investments and the roles humans play will change. To illustrate the disruption ahead, a drone flew around as Sondergaard talked.

A few themes illustrating the change.

Businesses will own only half of the world's server computing capacity (the rest will be cloud).

45 percent of digital business IT budget will go to services, primarily cloud. By 2017, pricing for cloud infrastructure will plunge. "It's a great time to be a buyer in the cloud," said Sondergaard. Only 10 percent of a digital business budget will go to hardware.

A digital business will run lean with 25 percent of the IT budget to go toward personnel. More than 40 percent of traditional IT department budgets go to personnel. 8 percent of digital business IT budget will go toward UX people, or folks that "study the digital human," said Sondergaard.

Sondergaard said companies will need to hire mobile, UX and data science workers today and smart machine, Internet of things, robotics, automated judgment and ethics experts in 2017. 2020 will require systems integration experts and new skills.

Smart machines are a superclass of technologies that'll provide a wide variety of work. "These are the building blocks of the digital business," said Sondergaard. "Falling behind on these technologies will mean serious problems."

One in three workers will be replaced by software or robots.

Managing risk will be critical to the digital business, but that doesn't mean turning down drone delivery and other innovations.

The only way tech leaders will navigate the change is to build the systems that'll enable the digital transformation. Top CEO priorities for 2014 are IT, staffing and talent, innovation, marketing, partnerships and alliances and value networks. "Now is your opportunity to prove yourself," said Sondergaard, giving CIOs a pep talk. "Embrace outside change. Your survival may depend on it."

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