Gartner says it’s not just about big data; It’s what you do with it: Welcome to the Algorithmic Economy

Gartner says it’s not just about big data; It’s what you do with it: Welcome to the Algorithmic Economy

Worldwide IT spending to surpass $3.6 trillion in 2016, a 1.5 percent increase from 2015

Worldwide IT spending is forecast to surpass $3.6 trillion in 2016, a 1.5 percent increase from 2015, according to Gartner, Inc. The IT industry is being driven by digital business, and an environment driven by a connected world. Gartner predicts spending on Internet of Things (IoT) hardware will exceed $2.5 million every minute in 2016.

Peter Sondergaard, senior vice president at Gartner and global head of Research, explained to an audience of more than 8,500 CIOs and IT leaders at the sold out Gartner Symposium/ITxpo, that interconnections, relationships, and algorithms are defining the future of business.

In five years, 1 million new devices will come online every hour. These interconnections are creating billions of new relationships. These relationships are not driven solely by data, but algorithms.

“Data is inherently dumb. It doesn’t actually do anything unless you know how to use it; how to act with it,” Mr. Sondergaard said. “Algorithms are where the real value lies. Algorithms define action. Dynamic algorithms are the core of new customer interactions.”

Mr. Sondergaard gave examples such as, Amazon’s recommendation algorithm that keeps customers engaged and buying; Netflix’s dynamic algorithm – built through crowdsourcing – keeps people watching; and the Waze algorithm directs thousands of independent cars on the road.

“The algorithmic economy will power the next great leap in machine-to-machine evolution in the Internet of Things,” Mr. Sondergaard said. “Products and services will be defined by the sophistication of their algorithms and services. Organizations will be valued, not just on their big data, but the algorithms that turn that data into actions, and ultimately impact customers.”

Digital Business

Digital business is when new businesses designed with both the physical and digital world are brought together. As analog revenue flatten, and decline for many industries, businesses are shifting to digital revenue from digital business. Global digital commerce is now over $1 trillion, annually.

Mr. Sondergaard said leading CEOs have told Gartner that their digital revenue will increase by more than 80 percent by 2020. 125,000 large organizations are launching digital business initiatives now.

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