THE Datacom Annual Cloud Report 2024produced in collaboration with analyst firm Tech Research Asia, highlights some significant changes in the way Australian businesses are approaching technology investments.
Faced with economic uncertainties and operational pressures, organizations are becoming increasingly conservative in their technology spending, even as they continue to invest. IDC Search predicts that ANZ’s IT market will grow from US$75.7 billion in 2023 to US$106.4 billion by 2028.
However, spending priorities are increasingly focused on finding the least resilient paths to fueling growth. Rather than investing in complex innovations or advanced technologies like AI, companies are looking to achieve growth through more fundamental transformation and areas like the cloud.
Conservative spending and changing priorities
Datacom research indicates Australian businesses are taking a more selective approach to technology spending, reflecting a “circling the wagons” mentality. With a focus on risk management and operational resilience, the focus is now on finding low-cost growth opportunities.
Mike Walls, Datacom’s director of cloud for ANZ, said in an interview with TechRepublic that cloud is emerging as a key part of this strategy.
“Modernizing technologies that leverage the cloud is a strategy that organizations are using to improve profitability while enabling the development of new digital experiences,” he said.
Datacom’s research shows that only 33% of Australian organizations have a formal hybrid cloud strategy, indicating that some of the focus on cloud is also related to ‘catching up’ to best practices.
“Cloud environments pose complex challenges in terms of system migration, governance, provisioning, compliance and, ultimately, costs,” Walls said. “That’s why we see our customers looking for a more nuanced approach to managing workloads on cloud platforms; as their organizations become more familiar with the behavior of applications and data in cloud environments.
SEE: Annual IT budget template (Prime TechRepublic)
Investments in the cloud, innovation excluded
Although spending and interest in cloud technologies suggests efforts toward cost management, this focus appears to be stifling innovation, with Australian businesses showing particularly discouraging trends. Earlier this year, a study by the Australian Bureau of Statistics found that a third of Australian businesses do not invest in innovation. This was mainly attributed to the lack of available funds to spend on these expenses, as well as the lack of skills.
These findings were reinforced in October, when Ed Husic, Australia’s Minister for Science and Industry, said Australian R&D – a key indicator of innovation – was in a “sorry state.” He referred to a report on innovation spending from the Ministry of Industry, Science and Resources revealing that “access to funds has overtaken cost and lack of access to skills as the main barrier to business investment”.
A danger of being left behind
The looming risk of these shifts in priorities is that Australian organizations will be left behind at a time when, in much of the rest of the world, the focus is on innovation.
As the Datacom report notes, investments made by organizations would help companies build platforms that can support innovation, which could open the door to investment in AI.
“Our data indicates investments in modernizing IT platforms to enable better growth, better experiences and better security,” Walls said. “In this environment, the door is wide open to innovation and new ways to drive efficiencies that are best achieved through well-informed technology investments. »
Cybersecurity is also a priority, with businesses investing heavily in managed security services. However, the report suggests that even though security is recognized as a priority, budgets and strategies still lag when it comes to innovation in cybersecurity, particularly in areas such as security. AI and cloud security frameworks. This gap highlights potential vulnerabilities that could be exploited if not addressed through comprehensive planning.
Overall, the big concern is that while Australian organizations are investing in innovation or have the potential to adopt it, the reluctance or lack of resources to take this step leaves businesses, particularly smaller ones , lagging behind.
Cisco AI Readiness Indexreleased in early 2024, found that only 5% of Australian businesses were fully prepared and equipped to take advantage of AI, compared to a regional average of 17%. Datacom data suggests that the reputation many Australian organizations share for being ‘lagging behind’ in innovation is not going to correct the current set of priorities.
Some skill challenge improvements
On the positive side, diminishing concerns about skills shortages within Australian organizations is encouraging, as these gaps have long been a barrier to innovation.
As Walls pointed out, the latest data from Jobs and skills Australia shows that 33% of all occupations experienced a skills shortage in 2024, a decrease from 2023 (36%). These findings help explain why Datacom data shows a reduction in concerns around recruiting and skills within organizations.
However, that doesn’t mean the challenge has lessened either, Walls added.
“The data marks a sharper move away from the operational impacts of the COVID years, where an internalized focus was vital to navigating such a challenging operating environment,” he said. “The fact that Australian organizations identified recruiting and retaining skilled staff as one of the top five challenges in this year’s report suggests that skills shortages in key areas persist, even as the overall trend increases. attenuates.
How to achieve growth without neglecting innovation
To succeed in the long term, Australian businesses must not neglect innovation, even if there are opportunities for growth with relatively conservative investments. This can be achieved in several ways:
1. Leverage data-driven decision making
One of the benefits of moving to the cloud is an increased ability to leverage data for analysis. This capability should be used to identify areas of the business that would benefit most from a more substantial investment in innovation.
2. Adopt a hybrid innovation model
Investing in innovation doesn’t have to be all or nothing. Allocate a percentage of the budget to small, experimental innovation projects. And when some of them start to prove themselves, do the same.
3. Participate in government and industry initiatives
The Australian government strongly encourages innovation, so take advantage of the opportunity to participate in large government R&D grant programs or industry partnerships to offset the costs of innovation.
4. Focus on upskilling the workforce for innovation
While “people” may not be a top priority, be sure to form innovation teams to lead efforts to explore and integrate new technologies.
By following these strategies, businesses can build resilience while remaining positioned for future innovation.
