Australian companies focus on rising technology spending

Datacom Cloud Annual Report 2024produced in collaboration with research firm Tech Research Asia, highlights some significant changes in the way Australian companies approach technology investment.

Faced with economic uncertainty and operational pressures, organizations are becoming increasingly conservative in their technology spending, although they are still investing. IDC research predicts the ANZ 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 path of least resistance to stimulating economic growth. Instead of investing in complex innovations or cutting-edge technologies such as artificial intelligence, companies are seeking to achieve growth through more fundamental transformations and areas such as cloud technologies.

Conservative spending and changing priorities

Datacom research shows Australian businesses are being more selective about technology spending, reflecting a “circling the wagons” mentality. As the focus shifts to risk management and operational resilience, the focus shifts to finding low-cost growth opportunities.

Mike Walls, director of Datacom’s cloud business at ANZ, told TechRepublic that the cloud is becoming a key part of this strategy.

“Technology modernization using the cloud is a strategy organizations are using to improve cost efficiency while enabling the growth of new digital capabilities,” he said.

Datacom research shows that only 33% of Australian organizations have a formal hybrid cloud strategy, indicating that part of the focus on cloud is also about “catching up” with best practice.

“Cloud environments present complex challenges in terms of system migration, management, provisioning, compliance and ultimately cost,” Walls said. “This is why we see our customers looking for a more nuanced approach to managing workloads on cloud platforms; while their organizations become more familiar with the behavior of applications and data in cloud environments.”

SEE: Annual IT Budget Template (TechRepublic Premium)

Cloud spending, innovation output

While spending and interest in cloud technologies suggest efforts to manage costs, such attention appears to be stifling innovation, with Australian businesses showing particularly discouraging trends. Earlier this year, research from the Australian Bureau of Statistics found that a third of Australian businesses are not investing in innovation. This was mainly due to the lack of available funds for these expenses, as well as a lack of skills.

These findings were further reinforced in October when Ed Husic, the Australian government’s minister for science and industry, said Australian research and development – a key indicator of innovation – was in “decline”.sorry, condition” He referred to a report on innovation spending from Department of Industry, Science and Resources showing that “access to funds has surpassed cost and lack of access to skills as the main barrier to business investment.”

The danger of being left behind

The looming risk of these shifting priorities is that Australian organizations will be left behind while much of the rest of the world focuses on innovation.

As Datacom’s report points out, the investments organizations are making will help companies build platforms that can support innovation, which could open the door to investment in AI.

“Our data points to investments in modernizing IT platforms to deliver better growth, convenience and security,” Walls said. “In this environment, the door is wide open for innovation and new ways to improve efficiency, which are best achieved through well-informed technology investments.”

Cybersecurity is also high on the agenda, with companies investing heavily in managed security services. However, the report says that while security is recognized as a priority, budgets and strategies still lag when it comes to cybersecurity innovation, particularly in areas such as AI security and cloud security systems. This gap highlights potential vulnerabilities that can be exploited if not addressed through comprehensive planning.

Overall, a major concern is that while Australian organizations are investing in innovation or have the capacity to innovate, the reluctance or lack of resources to take this step is leaving companies, particularly smaller ones, behind.

Cisco AI Readiness IndexResearch published in early 2024 found that only 5% of Australian businesses were fully prepared and equipped to use AI, compared to a regional average of 17%. Datacom data shows many Australian organizations’ reputation for being “laggard” in innovation will not change course under the current set of priorities.

Some improvements to skill challenges

On the positive side, concerns about skills shortages among Australian organizations have eased, as these gaps have long been a barrier to innovation.

As Walls noted, the latest data Jobs and skills in Australia shows that 33% of all occupations experienced skills shortages in 2024, down from 36% in 2023. These results help explain why Datacom data shows a decline in concerns about recruitment and skills among organizations.

However, that doesn’t mean the problem has subsided, Walls added.

“This data represents a clearer shift away from the operational implications of the COVID years, when internal focus was vital to navigating such a complex operating environment,” he said. “The fact that Australian organizations identified recruiting and retaining skilled staff as their top five challenges in this year’s report suggests skills shortages in key areas persist, even if the overall trend is weakening.”

How to achieve growth without neglecting innovation

To achieve long-term success, Australian businesses must not neglect innovation, even if there are opportunities to achieve growth with relatively conservative investment. This can be achieved in several ways:

1. Embrace the power of data-driven decision making.
One of the benefits of moving to the cloud is the increased ability to use data for analytics. This opportunity should be used to determine which areas of the business would benefit most from greater investment in innovation.

2. Adoption of a hybrid innovation model.
Investment in innovation does not have to be an all-or-nothing proposition. Allocate part of your budget to small experimental innovation projects. And when some of them start to show themselves, scale up in kind.

3. Participate in government and industry initiatives.
The Australian Government actively encourages innovation, so take advantage of the opportunity to take part in the government’s extensive R&D grant programs or industry partnerships to help offset the costs of innovation.

4. Focus on upskilling your workforce for innovation.
While “staff” may be a less important priority, still make sure you are building innovative teams to lead efforts to explore and integrate new technologies.

By following these strategies, businesses can increase resilience while remaining prepared for future innovation.