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The Role Of IT — has it ever changed?

Let’s be honest, the story of IT’s role in the enterprise has been anything but a smooth ride.

It’s more like a jerky elevator, stopping at every floor, sometimes getting stuck, and occasionally plummeting a few levels before lurching back up. One moment, IT is the hero, launching the company into the stratosphere with innovative e-commerce platforms. The next, it’s banished to the basement, a cost center to be minimized and controlled.

I’ve seen this firsthand, moving between the engine room (writing code, designing systems) and the penthouse (talking strategy with executives). This movement isn’t just about changing floors; it’s about translating languages, bridging perspectives, and understanding the forces that cause these dramatic shifts in perception. The story is not over.

The Rocket Launch: 1995–2005

In the heady days of the late 90s and early 2000s, IT was the engine powering a rocket launch. Companies like Amazon and eBay weren’t just selling products online; they were building entirely new business models, fueled by custom-built technology. Think of it as assembling a spacecraft from scratch — every component designed for a specific purpose, optimized for speed and efficiency.

The Numbers Tell the Story:

• In 1999, innovation reached a high of 28% of total IT budget allocations, significantly outpacing the 12% dedicated to mere maintenance.
• Amazon’s early infrastructure (1994–1997) saw impressive gains: recommendation algorithms boosting conversion rates by 31%, and proprietary inventory systems slashing fulfillment costs by 22%.
• Vertical integration allowed competitive advantages and strategic leverage.

This wasn’t just about throwing technology at problems; it was about deeply integrating IT into the fabric of the business. Architects and developers weren’t just coding; they were designing business processes, creating competitive advantages, and building the foundation for future growth. The average Global 2000 company in 1998 ran 75% of its core business processes on custom-built applications.

The Fall from Grace: 2005–2015, The Cost-Cutting Era

Then came the crash. The dot-com bubble burst, and suddenly, the CFO’s office became the most important room in the building. Sarbanes-Oxley (SOX) added fuel to the fire, emphasizing compliance and control. IT’s wings were clipped.

The elevator lurched downwards.

• By 2005, CFOs controlled 73% of IT budgets.
• IT budget growth plummeted from 12.4% in 2000 to a meager 3.1% in 2005.
• Custom code, the hallmark of innovation, decreased to just 29% of the enterprise mix.
• Standardized ERP and other solutions from big vendors gained prominence. The focus shifted from building to buying, from innovation to standardization. The key metric became “cost per transaction,” not “time to market” or “customer acquisition cost.” A Gartner study in 2008 found that 62% of CIOs reported directly to the CFO, a stark contrast to the late 90s when many reported to the CEO or COO.

The Cloud Renaissance and the Hybrid Reality: 2015–2025

Just when it seemed IT was destined to remain a cost center, the cloud arrived. Not as a magic bullet, but as a powerful new tool that could shift the dynamics once again. The cloud providers — AWS, Azure, Google Cloud — offered a compelling value proposition: agility, scalability, and a shift from CapEx to OpEx.

The elevator started its ascent, but it wasn’t a direct flight to the penthouse.

• Cloud computing experienced explosive growth (35% CAGR).
• AI adoption surged (42% year-over-year growth).
• Global IT spending jumped from $3.5 trillion during the peak to cost center era and the reached over $5 Trillion. By 2020, 58% of workloads had migrated to the cloud. But — and this is a crucial “but” — legacy systems didn’t disappear. They remained, a significant drag on resources and agility, consuming 31% of IT budgets.

The emergence of “shadow IT” — business units procuring their own cloud services without IT’s involvement — became a major headache. A 2016 survey by McAfee found that 80% of employees admitted to using non-approved SaaS applications. This created a fragmented, often inefficient, and sometimes insecure IT landscape.

The current state is a hybrid one. A bit like one of the old buildings where you still see the crank operated, ancient elevators but also some more modern lifts. Which do you chose?

2021–2025 The Age of Nuance, Facts, Figures

The numbers for the current period (2021–2025) paint a picture of a mature, complex IT landscape. Global IT expenditure reached $5.1 trillion in 2024 and is projected to hit $5.6 trillion in 2025. But the distribution of that spending reveals the ongoing tension between innovation and operational efficiency.

• IT Services: 37.5% ($2.1 trillion) — A significant portion, indicating the reliance on external expertise for both legacy maintenance and new technology implementation.
• Communications: 24.1% ($1.35 trillion) — The backbone of connectivity, essential but not inherently strategic.
• Enterprise Software: 12.1% ($680 billion) — A mix of legacy systems and newer SaaS applications.
• Devices: 12.9% ($720 billion) — The hardware that powers the digital workforce.
• AI/ML: 3.8% ($210 billion) — The fastest-growing segment, representing the push for data-driven decision-making and automation.

Regional Variations and Strategic Intent

The geographic distribution of IT spending reveals interesting disparities:

• North America: $2.04 trillion, with a relatively high innovation-to-operational spend ratio (1:1.8).
• Europe: $1.53 trillion, with a more conservative ratio (1:2.1).
• Asia-Pacific: $1.22 trillion, growing rapidly (6.7% CAGR) and with a strong focus on innovation (1:1.2).
• Latin America: $255 billion, with a focus on operational efficiency (1:3.4).
• Middle East/Africa: $110 billion, showing the highest operational focus (1:4.0).

These numbers reflect different economic realities, levels of digital maturity, and strategic priorities.

And Industries matter

Across various industries, we see further differentiation:

• Tech companies: Allocate 38% of their IT budgets to innovation, compared to just 12% for compliance.
• Financial services: Spend 19% on innovation and a hefty 31% on compliance.
• Healthcare: Balances innovation (27%) with infrastructure (35%).
• Retail: Shows a strong innovation focus (33%), reflecting the competitive pressures of e-commerce.

This highlights the fact that “IT strategy” is not a one-size-fits-all proposition. The optimal balance between innovation and operational efficiency depends on the specific context of the organization, its industry, its competitive landscape, and its overall business strategy. The right tools need a clear view from up-top and that will determine which one will be successful.

The data reveals a nuanced reality. IT is simultaneously a cost center and a value driver. The challenge for today’s leaders is to manage this duality, optimizing for both efficiency and innovation. This requires:

• Metric Modernization: Moving beyond traditional IT metrics (uptime, SLAs) to measure the business impact of technology investments (e.g., customer lifetime value, time to market).
• Architectural Flexibility: Embracing a hybrid approach that combines cloud-native applications with legacy systems, optimizing for agility and cost-effectiveness. And getting teams to do this well!
• Talent Investment: Recognizing that skilled IT professionals are essential for both maintaining existing systems and driving innovation. A 2023 McKinsey study found that companies with strong IT-business alignment are 50% more likely to outperform their peers.

The IT elevator is still in motion. It’s not a simple journey from the basement to the penthouse, but a constant oscillation between different levels, driven by economic forces, technological advancements, and strategic choices. The key is to understand these forces, adapt to the changing landscape, and ensure that IT is always aligned with the overall business objectives. IT has always had to juggle strategic innovation with operational reliability. The rise of new technology requires that IT executives keep finding the proper positioning within the organizational hierarchy that works for the goals and challenges of their organization. And these changes mean that those organization will be more agile to keep adapting as new technological opportunities arrive on stage.

Only by becoming students of business and astute interpreters of context can IT and Technology organizations earn the place where organizational trajectory is plotted and followed. Be smart and always learn new things as well. That will define the successful enterprise.

[1] Find more insightful ways of seeing IT for all it brings at https://platformeconomies.com — and get my book on everything IT Architecture now, while you are at it: https://a.co/d/j7Fc6rN