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November 20, 2014
By Charles Ellison

For the most part, we see global IT spending continuing to increase as businesses seek a completely digitized operations model. In the pursuit of digital business, organizations will need to modernize everything from their infrastructure to customer-facing experience. A big part of that will be adjusting corporate budgets to the needs of an expanding millennial generation over the next decade.

That generation is forcing company CEOs to align their business goals with investments in technology; CIOs will have to show the business value in technology usage. Gartner predicts global IT spend will be up more than 2 percent by the end of 2014 compared to 2013, and will be up by another 1.6 percent in 2015.

While the transition into digital business is just a natural evolution of the modern marketplace, it’s also economy-wide preparation for millennials. Millennials are that increasingly dominant demographic force of nature in the population. At ages ranging from 18 to 37, they are nearly 30 percent of the U.S. population and about 7 percent larger than the celebrated baby boom generation that dominated the social landscape in the late 20th century. By 2020 they will make up over half the U.S. labor force; by 2030, they will represent over three-quarters of the global workforce. 

And since millenials are extremely literate in the digital medium, businesses have no choice but to adapt to their needs and demands as the current economy is in the Age of the Customer, as Forrester calls it. “In this age of the customer, the only sustainable competitive advantage is knowledge of and engagement with customers,” observes analysts David Cooperstein and Josh Bernoff in a 2013 note. “The successful companies will be customer-obsessed, like, Macy's, and” Forrester’s Pascal Matzke talks more about how CIOs will be forced to invest more in their organization’s BT, or business technology, agenda as BT spend increases by 10 percent annually. “CIOs need to change how parts of their tech management organizations work—governing and measuring them based on business outcomes instead of on project execution,” writes Matzke in a recent blog. “Plus they need to evolve a culture that embraces responsiveness and rapid, continuous improvement to changing customer needs —something more and more CIOs will derive from the best practices of commercial software firms.”

Population shifts are naturally pushing organizational shifts. “Organizations intent on becoming social businesses should embrace consumer-oriented technology and services that support a more agile and engaged workforce,” writes Gartner’s Carol Rozwell in a research note earlier this year. “Creating an engaging workplace is important to the success of current employees and helps attract "millennials" to the organization. Millennials—who will comprise 75% of the global workforce by 2025—say they want to work for organizations that foster innovative thinking, develop their skills and make a positive contribution to society.”

In the meantime, automation will increase as the millennial workforce grows, with more skill sets becoming automated or dominated by artificial intelligence while the demand for talent that can service those technologies will grow. That’s all a result of a very complex, demanding and sophisticated millennial-driven society that wants fewer layers between purchase and service or product. Hence, Gartner analysts Ruby Jivan and Frances Karamouzis predicts, “by 2018, digital business will require 50% fewer business process workers and 500% more key digital business jobs.”

Looking at those trends, a big question looms: As businesses adapt to the millennial generation and make the necessary digital investments, will it be worth it? It’s a relevant query considering businesses are expected to increase efficiency or do a whole lot more for less. Jivan and Karamouzis note  “speed is the absolute obsession” in the marketplace now, that it is “displacing cost.” But there is valid concern about how that matches up to a generation that is described by many polling observers as somewhat cheap. The Atlantic’s Derek Thompson and Jordan Weissmann riffed over the summer in The Cheapest Generation that “[m]illennials have turned against both cars and houses in dramatic and historic fashion. Just as car sales have plummeted among their age cohort, the share of young people getting their first mortgage between 2009 and 2011 is half what it was just 10 years ago, according to a Federal Reserve study.”

They are, however, embracing technology and driving it in big ways—but that doesn’t necessarily translate into big spending (which ultimately forces companies to balance between expanding IT budgets and crunched profits). “In other words, mobile technology has empowered more than just car-sharing. It has empowered friendships that can be maintained from a distance,” added Thompson and Weissman. “The upshot could be a continuing shift from automobiles to mobile technology, and a big reduction in spending.”

Millenials want more accessibility, speed, and less layer for cost (think Uber). Yet, achieving speed is going to cost businesses—just look at the financial services industry and its ongoing struggle with containing IT budgets, a large part of that driven by emerging customer technologies and compliance costs. Are we relying too much on a cost-anxious generation to help make the investment?

The balance will be a need to embed automation and AI into the operating costs of a company while keeping revenue high. Robotics and AI can reduce costs, and the hope is the savings will be used to maintain constant innovation. The positive side is that these disruptions can move millenials and others into higher-paying, high-yield professions requiring deeper strategic and data analytic skills that prompt businesses to stay on the cutting edge. Businesses will need vendors as partners who can help them contain costs, while helping them stay creative and next-level ready. Service providers can play a big role, keep up with those trends, and identify the right expertise much sooner rather than later.

Charles Ellison is a senior analyst relations strategist for TEKsystems. He keeps close tabs on changes and public policy shaping the innovation space. He is also a former congressional staffer, senior aide to state and local elected officials and an expert advocacy strategist. You can reach him with questions and comments @twoARguys via Twitter.

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