Asia Pacific technology spending priorities do not match expectations of technology: Gartner

By Digital News Asia May 15, 2017

Firms aren't moving fast enough to capitalise on the potential of innovative technologies
Many business leaders still cannot describe digital business well, and need education

Asia Pacific technology spending priorities do not match expectations of technology: Gartner

ASIA Pacific CEOs expect productivity in their organisations to increase by 24% by the end of 2018, with revenue (cited by 26% of respondents) and profitability (15%) as the top two metrics of success, according to Gartner, Inc's 2017 CEO survey.

However, the survey uncovers a gap between what they want to achieve and where technology investments are being made.

The 2017 Gartner CEO Survey gathered data from 388 CEO and senior business leaders of companies with greater than US$250 million in annual revenue in more than 25 countries. Ninety-six business leaders were from Asia/Pacific.

To achieve such aggressive productivity gains, Asia Pacific CEOs believe that conventional technologies (cloud, ERP, analytics and CRM) will help them, rather than technologies that support digital transformation (digital environments, blockchain, the Internet of Things [IoT], robotics, artificial intelligence [AI] and 3D printing).

This is despite their awareness and understanding of the major impact that these key digital business technologies will have on their industry.

"Asia Pacific CEOs want to increase profit margins while maintaining sales growth, and they expect IT to play a strong role in this," said Partha Iyengar, vice president and Gartner Fellow.

"The problem is that Asia Pacific firms aren't moving fast enough to capitalise on this potential. Their focus on conventional technologies will likely have less of a transformative effect than more innovative technologies."

IT ranks second business priority after growth

CEOs expect IT to play a strong role in fuelling this profitable growth. "IT-related" appears as the second business priority after growth, reflecting the importance CEOs give IT.

This continues a trend that first appeared in our 2015 survey, when IT reached the top five business priorities of CEOs. This year's ranking of No. 2 is the highest ranking IT has achieved in the last three years.

According to Gartner, Asia Pacific companies benefit from being located in the region with the fastest-growing economy, so they worry less about sales growth than companies in other regions. Instead, Asia Pacific companies are more focused on increasing profit than revenue growth.

Digital business offers a way for Asia Pacific firms to lower their cost structure drastically and thereby increase margins, but these firms are not pursuing digital business as aggressively as they could.

Missing opportunities to advance digital business

According to the survey, Asia Pacific enterprises are slightly behind global counterparts in terms of digital business maturity, with 20% of Asia Pacific CEOs describing their enterprise as "digital to the core," compared with 22% globally.

Asia Pacific firms are also slightly behind global counterparts in the phase of digital business they are in.

"Digital" means different things to different people, and Asia Pacific CEOs hold less transformative views of digital business than their global counterparts, according to the Gartner survey.

It found that 45% of Asia Pacific CEOs think of digital transformation as a way to optimise their current business versus 42% globally.

"CIOs need to take on an evangelising role with the CEO and other business leaders about the transformative possibilities of digital business using real examples," said Iyengar.

"Many business leaders still cannot describe digital business well, and need education."

In terms of investing to gain new digital business capabilities, the survey indicates that Asia Pacific organisations are not as aggressive as their global counterparts.

Eighteen percent of Asia Pacific organisations have taken an equity stake in a technology or digital business entity, compared with 24% globally. Despite this, Asia Pacific respondents say that equity stakes pay the biggest dividends.

"This disparity may be due to more Asia Pacific CEOs identifying access to capital as a constraint on growth than global peers," said Iyengar.

"There are also regulatory grey areas in parts of Asia that constrain companies from making technology investments or acquisitions outside of their industry."