Worldwide IT spending is expected to total $3.49 trillion in 2016, a decline of 0.5 percent compared with 2015 spending of $3.5 trillion, according to Gartner Inc. But spending on IT services, software, and data center technology is projected to increase, the research firm predicts.

"There is an undercurrent of economic uncertainty that is driving organizations to tighten their belts, and IT spending is one of the casualties," said John-David Lovelock, research vice president at Gartner, of the firm's latest IT budget forecasts.

"Concurrently, the need to invest in IT to support digital business is more urgent than ever,” Lovelock said. “Business leaders know that they need to become digital businesses or face irrelevance in a digital world. To make that happen, leaders are engaging in tough cost optimization efforts in some areas to fund digital business in others."

For example, the savings from legacy system optimization and enhancements are being redirected to fund digital initiatives, Lovelock said. “It's about doing more with the same funds,” he said.

Typically, less than 10% of organizations are in cost optimization or cost cutting mode, according to Gartner. But the need to spend on digital business initiatives in a time when revenue growth does not support runaway IT budgets is forcing more organizations to optimize as a first step.

The most evident results of optimization efforts are in the switches in spending between assets and services. "Most traditional IT now has a 'digital service twin'—license software has cloud software, servers have infrastructure-as-a-service, and cellular voice has VoLTE," Lovelock said. "Things that once had to be purchased as an asset can now be delivered as a service.”

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