As the economic slowdown continues, CIOs, CFOs and enterprise technology teams continue to grapple with frozen budgets and how their enterprise will keep their operations functioning as they attempt to move forward with crucial digital transformation efforts, and possibly shelve those initiatives deemed less critical.
How are CIOs deciding what projects get postponed? Many projects underway now are focused on business continuity and supporting remote work, but that can’t be the only focus for CIOs and enterprise technology leaders.
Miles Ward, CTO at business-technology consultancy SADA Systems, said there is a substantial shift to enable staff to productively work from home, increase flexibility in spending and to automate operations, and rely increasingly on managed services so that demands on operations personnel are reduced.
“Projects outside of those focus areas are going to get deprioritized unless they’re in the very final stages of delivery, where stopping creates more waste than it could prevent,” said Ward.
According to a recent survey from Dresner Advisory Services, 61% of respondents said projects and budgets will be impacted by the pandemic, with sizable majorities reporting the same in Asia Pacific, Europe, Middle East, Africa and North America. The biggest impacts are expected to be in operations (manufacturing, supply chain, services) at 89%, executive management at 83%, marketing at 75%, finance at 65%, IT at 60%, research and development at 60% and business intelligence at 56%.
Dresner Advisory Services found that those organizations with more than 5,000 employees expect the lowest level of impact, while organizations with 1,001 to 5,000 reported the highest level of impact.
Jarod Greene, general manager at the Technology Business Management Council, said a great amount of uncertainty surrounding COVID-19 remains, including the rippling health, economic and business impact. It all presents an incredible challenge for all business leaders.
“CIOs and other IT leaders, specifically, are in the thick of this challenge, [and they are] not only responsible for maintaining the continuity of operations and seamless work experiences but also factoring in the short-, mid- and long-term financial impact of their decisions,” said Greene.
Greene contended that CIOs play a vital role in times like these, and that they can help organizations to clearly understand the costs and corresponding value of their technology investments, and therefore can advise business leaders of informed tradeoffs, rather than merely widespread cuts.
“Conversations I’ve had with Technology Business Management Council members over the past days and weeks have focused on re-planning and forecasting and the execution cost optimization exercises—with the ability to measure the impact of those decisions,” said Greene.
Time to Invest in Measurable Impact
For many organizations, the focus has shifted to delivering improved technology experiences to customers.
“The dot-com bubble burst and 9/11 may seem like ancient history to some. These were events that forced businesses to focus on what’s really important: providing value to customers and investing in projects with measurable impact on revenue and cash flow,” said Vaclav Vincalek, partner at business-technology consultancy Future Infinitive.
“The cash shortage refocused management teams on what was vital for their businesses. The current situation will be no different. Business will have to adapt to a new environment and adapt quickly. Companies with well-planned strategies will adjust some tactics. If they’ve already planned for change and aligned with their vision, they’ll continue to succeed with focused execution,” said Vincalek.
Alex Miłowski, platforms researcher and evangelist at Redis Labs, agreed.
“Essential services, especially customer-facing communications systems, are likely to face surges in demand. As such, it is important to meet those demands rather than pull back and postpone,” said Miłowski.
“It very much depends upon what type of business you are in. It’s not all doom and gloom. It hasn’t been for us, or for many of our customers,” added Kevin Grice, director of digital transformation at Trace Solutions. “That said, I think it’s a fair assumption that there will be widening ripple effects through all parts of the economy—so there are likely to be challenges ahead. How big the ripples are, and how long they last, is yet to be seen.”
“Many companies have gone into a temporary lockdown, with a freeze on all development to reduce risk and the possibility of additional costs in a time of reduced cashflow. However, if this emergency goes on for any significant length of time, that approach will soon become unviable. So businesses will have to adapt,” said Grice.
Not all companies have retrenched and have decided to keep moving forward with investments.
“At Laserfiche, we currently do not have any projects on hold, rather, we are working to accelerate any [projects] that are related to business process automation as it helps the workforce. Content management and automation will continue to lead upcoming projects. As IT leaders, we have a responsibility to get things scaled quickly. The challenge we have is being agile and adapting to our ‘new normal,’ but we’re continuing to move forward,” said Thomas Phelps, Laserfiche’s CIO.
Laserfiche isn’t the only company that has decided to keep moving forward. A survey of 317 CFOs, from research firm Gartner, found that 38% of those surveyed don’t have any plans to cut costs, and only 16% of CFOs said they plan to cut IT by more than 10%.
What does Gartner advise enterprises do? Essentially, to do what they are doing: focusing more on what works and cutting the deadweight.
“Where there is excess scope in their organization’s product or service portfolios, the hidden costs of complexity drag down profitability,” Dennis Gannon vice president, advisory at the Gartner’s finance practice said in this statement. “The best CFOs will use COVID-19 as the catalyst to derive significant operating leverage from their most profitable lines of business without destroying value.”