9.9 Post-Pandemic IT Investment Survey: Long-term Plans Can Wait...

9.9 Post-Pandemic IT Investment Survey: Long-term Plans Can Wait... - CIO&Leader
Remember that there is only one important time and it is Now. The present moment is the only time over which we have dominion.
 
―Leo Tolstoy, The Emperor's Three Questions
 
Crona is the best thing to have happened for CIOs and CISOs struggling to convince the top management to step up investments on digitization. Right? Wrong. 
Corona surely has made the business executives—top managers to entry-level knowledge workers included—'appreciate the value of digitalization.’ But that is what it is. 
Translating that appreciation/realization/enlightenment into action requires a few steps. And there are hurdles in the way—three major ones at the least. 
First and foremost hurdle is the uncertainty that prevails. The way businesses worked in February 2020 and in June 2020—just four months apart—are completely different. Of course, there is lot more digitization involved in June, as compared to February. But that question arises later. The critical requirement for any long-term planning is some visibility into the planning period, which, today, is completely missing. 
For years now, businesses have been talking of disruptive changes. Many companies also have had huge business continuity planning, largely focused on natural disasters or unrest. But the disruption that the pandemic bought, in terms of its nature and magnitude, had hardly been imagined. 
While the technology fraternity, thanks to years of preparation, did a commendable job in responding to the new needs, it was to keep the wheels moving. The changes were for addressing immediate needs. It was a forced refresh. And some of the changes will stay. No one is sure—which ones and to what extent. 
That is precisely why people have put a brake on all long-term plans. Our research, conducted in June-July among close to 60 senior-level IT decision makers in large enterprises reveals that long-term plans are almost at the bottom of IT-investment priority—a tad better than only desktop purchase.   
Second hurdle is the business situation. Almost all businesses have a huge cashflow issue. The economy was anyway in bad shape. It has gone worse, due to the pandemic. 
While all businesses have seen severe cash crunch, some businesses—like airlines, hospitality, entertainment—have seen irreparable damage. So, most businesses do not have the money to invest, no matter how convinced they are about the ability of digital to make their business more effective, more efficient. 
Last hurdle is the issue of budget allocation. Many organizations have invested—and that is what created this inflated positive hype—on digitalizing some functions, sub-functions or closed the non-digital gaps that remained in otherwise digitalized processes. These investments were not planned, at least not in the short run but they had to be made for making the businesses run. That was the bare minimum which kept businesses running. This was done at the cost of long-term plan, which anyway was risky because of the uncertainty. 
So, the joke that the pandemic has driven digital transformation more than the CEO or CIO, is just a joke. Tactical digitization may have gone up but long-term transformational plans are the biggest sufferers when it comes to adjustment in IT investment priority, post pandemic. 
The difference between the two is not difficult to comprehend. A transformational investment is targeted at changing business fundamentally, leveraging technology; a tactical digitalization is aimed at making something ‘work’ somehow. 
Beyond a certain magnitude, no organization would make a series of tactical investments. For technology companies, all it means that unless the situation improved, business breadth may go—when large users make those investment in more geographies, more business functions—but the depth of digitization will have to wait till things become a little clearer and the cash situation becomes a little better. 
When will that happen? Our guess is as good as yours. 
But organizations will not just sit, as businesses move. CIOs have already reprioritized their IT investments. The research presented in this story probed for just that. But unlike most of our other research, where we probe both short-term and long-term plans, we focused mostly only on investments in three months to 12 months—except one question where we asked them which business functions would see continued investment beyond 12 months. 
As Corona has reinforced the Tolstoyan thought about ‘now’ being the most important time, we present here the research findings that throw some light on the ‘now’ plans of IT managers in large enterprises. 
 
The Big Question: Overall Investments 
 
Only a third say overall IT investments in the post-pandemic scenario, in the next 3-12 months will be more than what was planned. That itself is anything but surprising. While 53% say the investments will be negatively impacted (which makes more sense intuitively), the pessimism is not showing when we asked them about individual investment areas.
In fact, in all but three areas—desktops, enterprise software and data center infrastructure—more than half the respondents said that investments will be somewhat positively or very positively impacted. 
These two findings are contradictory. Right? How is it that the overall IT spend will be negatively impacted and most of the areas would see positive change? A technical explanation is that both enterprise software and data center account for the lion’s share of enterprise IT investment. But again, the mood is also not too negative there; just that less than half of the respondents see those areas being negatively affected. 
So, what explains this contradiction? Our off-the-record conversations with some CIOs give some idea. (These conversations are not part of a formal research; so, we are not going to defend this; it is just some explanation; you can have your own theory). 
“When you ask them about an individual area, they give you their assessment of the need—whether it will go up or go down. When you ask specifically about IT investment, the reality creeps in. And you know the reality,” said a CIO in a large manufacturing company. 
Another attributed this anomaly to “hope versus reality”, essentially hinting at the same reason. Most others agreed that the impact will be positive but only when the situation becomes clearer. That is a big When….
 
What’s In? What’s Out?
 
Any disruption creates a churn. And this disruption has no parallel in its depth and breadth. It has created both deep impact and is global. One unique attribute of this disruption is that it has made all of us—organizations, governments and people—technology savvy, in a matter of days. 
It is but natural that organizations will rewrite their tech strategies. We tried to figure out how—albeit, only in the short to medium run, for reasons explained above. 
And here are the findings. Respondents were asked how each of these IT investment areas be impacted in the next 3 to 12 months, separately. For easier comprehension and comparison with each other, we have reduced the findings of each technology area to an index—basing it on how many people said it would be positively (slightly or significantly) impacted, how many said it would be negatively (slightly or significantly) impacted and how many did not envisage a notable change.  
Some of the findings are not difficult to guess—the focus is on security, collaboration or cloud. They are the top things being talked about. Laptops too are essential for remote workers and is a natural tool for distributed working.  
Interestingly, what came as a surprise is that BCP/DR featured quite low in the IT manager’s list. Based on the comments left by the respondents and the CIOs we spoke to, something disturbing emerges: people have been let down by the current BCP/DR. While no one questions the effectiveness of technologies used, BCP is more about a plan than technology. And it did not deliver. People have spent huge money on protecting data centers and infrastructure from earthquakes, fires, water and through better planning of power and communications. But the plans did precisely little for the situation that arose in the wake of the pandemic. Data centers were hale and hearty. It is the people who were stuck. Internet—that too public Internet—and Zoom/MS Teams/Webex/Google Meet saved the day for many organizations. Of course, it created new security challenges and organizations do want to address that. 
Compliance is still fairly top of the mind and so is skill development. The latter probably is in an all-time highest position. 
Enterprise software is an area that is almost towards bottom. While part of it may have come from a backlash which is evident in CIO conversations regarding some large software makers’ inflexibility in a situation like this, this could also be because of a shift to SaaS, which is better for not just cash-flow, it suits a typical wait-and-watch situation. 
Biggest loser, of course, are the long-term transformational projects. As discussed in the beginning, it is all about now, present and the immediate. No one knows how things will shape up. Tactical digitalization is significantly up, even though it does not show up at top. That is probably because many CIOs would not consider tactical. But the open-ended questions about priorities (see word cloud) point to a number of small digitalization activities. 
Priority for some of the pre-pandemic hot areas like data analytics has gone down significantly. 
But these findings must be taken for what they are. They are short-term (three to 12 months officially, practically maybe three to nine months) plans. Long-term plans too will change. But no research can find that out now. 
 
What part of business would be digitalized?
 
One of the most interesting findings is the difference in priorities in short-term and long-term plans (only time we asked them about plans beyond 12 months) in specific business functions. 
While Customer Service remains a top priority both in the short and long runs, Supply Chain, which is a big priority in the immediate future, next only to Customer Service, goes to the bottom of the table as a long-term priority. Supply Chain, which is a highly digitized area, most digitized in a manufacturing operation, had to be tweaked in the wake of COVID-19 to make certain approvals (which were still paper-based) digitized and certain processes contactless. But there is no major overhauling required. That is what probably takes the function off the list in the long run. Sales rises as the top digitization candidate in the long run. 
When asked specifically about areas that would see maximum digitalization in the short run, ‘customer acquisition and management’, ‘customer experience’, ‘customer service’, ‘customer-centric systems’, ‘customer engagement’ featured predominantly. ‘Processes automation’, ‘digitization of new processes’, and ‘supply chain analytics’ and ‘sales automation’, ‘employee experience’ and ‘employee engagement’ also figured in the answers. The word cloud represents the most frequently used words in the answer to the question: list three specific sub-areas within each of the functional above areas where digitization efforts will be maximum in the immediate future? 
Expectations from IT
 
Asked what are the expectations post the realization of digitization’s value in the enterprise, most IT managers pointed to cost optimization. That is not surprising considering our research focused on the next few months’ priorities. Most businesses are facing cash flow issues and are looking at cost optimization. CIOs are the best bet to help achieve that by streamlining processes.
On being asked what are the top three impacts on IT due to the change in business environment, most IT managers pointed to budget cuts. “Cut in overall IT budget”, “controlled IT budget”, “reduction in immediate spend”, “hold on projects” were the most common responses. Close to half of the respondents agreed to have faced an IT budget cut or cost optimization. If there were budget cuts, there is also a push for more and more digitization. Of course, expectation on increased security and revamp of business continuity also came up as a factor that would impact IT significantly.
The word cloud summarizes the responses to this question.
The focus on short-term, cost optimization and tactical digitization of specific functions and sub-functions, all point to the cautious approach taken by the IT managers in the wake of uncertain conditions prevailing post the pandemic.
Endnote
 
The biggest question that has not been answered by this research is—how it’ll ultimately happen? Based on initial discussions with CIOs, we decided to leave it out, as including that for the sake of some numbers would not have done justice to the objective with which we had planned this survey—to give a realistic picture to the top IT managers and technology companies—and assess whether their problem is ‘only their own’ or the fraternity is facing the same challenges. 
As things become a little clearer, we will surely supplement it with a long-term outlook research. Till then, you need to tell us how you are steering through these uncertainties. 
Your experience is our data point. And our collective data point is your actionable insight.
 

The focus on short-term, cost optimization and tactical digitization of specific functions and sub-functions, all point to the cautious approach taken by the IT managers in the wake of uncertain conditions prevailing post the pandemic


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