Global IT spend is projected to contract 8% in 2020, according to Gartner. Gartner expects IT priorities to move away from projects aimed at growth or transformation, in favour of mission-critical technology that supports operations. While companies may pause large-scale cloud projects, public cloud services are expected to grow 19% this year, according to the forecast. What’s your business’s strategy?
The impact of COVID-19 on IT has yet to be fully appreciated. However, what is certain is a radical overhauling of current projects, and future investments will be impacted. If a global downturn becomes a reality, CTOs and CIOs will look to support their mission-critical systems, pushing back what may have been significant long-term investments in their digital development.
Indeed, Gartner’s forecast is stark: “CIOs have moved into emergency cost optimization which means that investments will be minimized and prioritized on operations that keep the business running, which will be the top priority for most organizations through 2020,” said John-David Lovelock, distinguished research vice president at Gartner. “Recovery will not follow previous patterns as the forces behind this recession will create both supply-side and demand-side shocks as the public health, social and commercial restrictions begin to lessen.”
All segments will experience a decline in 2020, with devices and data centre systems experiencing the most significant drops in spending. However, as the COVID-19 pandemic continues to spur remote working, sub-segments such as public cloud services (which falls into multiple categories) will be a bright spot in the forecast, growing 19% in 2020. Cloud-based telephony and messaging and cloud-based conferencing will also see high levels of spending rising 8.9% and 24.3%, respectively.
Lovelock concluded: “In 2020, some longer-term cloud-based transformational projects may be put on hiatus, but the overall cloud spending levels Gartner was projecting for 2023 and 2024 will now be showing up as early as 2022.”
The new focus of spending is supporting the mass of workers who are now operating from their homes. Businesses have scrambled, to a degree, to rapidly expand the technologies needed to support their workers and, ensure that communications are secure.
According to research from McKinsey, SaaS will continue to expand and become even more relevant in a post-COVID-19 tech stack. McKinsey describes this expansion as the ‘next normal’ with the ‘SaaS footprint’ extending with services from the big three cloud vendors.
Post-COVID tech investment
To gain an insight into how businesses are changing their IT investment strategies, Silicon UK spoke with a range of business leaders.
[DL] David Lanagan, Senior Consultant, CloudStratex.
[JW] Jon Wrennall, CTO, Advanced.
[CW] Cary Wright, VP Product Management, Endace.
[MW] Martin Wilson, Director, Bright.
[PW] Pete Watson, CEO, Atlas Cloud.
[CH] Chris Huff, Chief Strategy Officer, Kofax.
[BB] Bob Bailkoski, CEO, Logicalis.
[MC] Martyn Crew, Director, Gigamon.
[VK] Vijay Kurkal, CEO, Resolve.
How are CTOs and CIOs changing their IT roadmaps to support the ‘new normal’?
[JW] Just as proactive schools are investing in school infrastructure to educate children at home, progressive businesses are reinventing their services to not only maintain business continuity now but, ensuring that recovery will come and, the resilience of these active and agile businesses will be repaid.
Technology is a huge enabler for crises like this, and solutions such as mission-critical cloud software and fully managed IT outsource services can help organizations ensure they are equipped to cope now and in the future. As we have seen, some organizations are now delivering services virtually and have made a significant shift to online and flexible working.
[DL] Businesses who paid only lip service to technology and digital in their corporate strategy, will now be placed under immense stress, as they try and operate under the new Coronavirus induced paradigm. They need to understand they cannot just muddle through and expect to come out smelling of roses. They must make changes now, and prepare for the future, as it is likely a similar pandemic will happen again. After all, there have been several dangerous global outbreaks since the turn of the century, such as SARS, H1N1, and more recently, the Ebola outbreak in 2015.
[CW] Post COVID, we’ll see organizations shifting to implementing a network architecture that lets them deploy cyber defence detection and analytics tools remotely, which will help them to maintain both the visibility of the network and, the agility to detect and deal with issues. To do this, they will need to adopt a flexible infrastructure – one where the compute resources and traffic capture required for cybersecurity solutions are pre-deployed as part of the standard network infrastructure. Once this is accomplished, organizations can virtualize security tools; deploying, upgrading and reconfiguring tools remotely as changing needs dictate.
[PW] The roadmaps CIOs and CTOs had carefully created, planned, budgeted and negotiated for over many months have had to be rapidly redrawn. Not only have these roadmaps been rapidly redrawn they’ve also undergone some major re-engineering and changed significantly since the turn of the year to pave the away for a much quicker digital transformation process for many businesses.
Why have these roadmaps had to be so significantly re-engineered?
Before the Coronavirus pandemic, the ONS stats tell us that during the most recent 12-month period from January to December 2019, only 5% of British people in employment, reported that they worked from home.
That’s just 1.7 million of us out of a total workforce of 32.6 million – at the height of the lockdown, five to ten times more people have been doing that with the results of our survey suggesting that 55% of office workers were working from home.
I think Nelson Phillips, professor of innovation and strategy at London’s Imperial College Business School, raised an interesting point when he said: “I have heard chief executives say they have made five years’ progress on their plans to transform in two months.” What’s most significant about that is not just the timescales; it’s the level of the people making that observation. While once they had only been the domain of IT managers, IT roadmaps and digital transformation are now a board-level issue in hundreds of thousands of businesses across the UK.
That’s hugely significant in terms of the question of how CTO and CIOs are changing their roadmaps. IT roadmaps and digital transition now have a lot higher profile within businesses. As a result of this, CIO and CTOs need to foster more exceptional relationships across the C-suite and the more extensive business to get buy-in from the exec leadership and senior management teams. There’s a derogatory comment going around that COVID-19 is driving digital transition not CIOs or CTOs. That’s nonsense. COVID-19 might have created the necessity, but it’s CIOs and CTOs with their hands on the tillers sailing the ship through the storm.
[CH] CTOs and CIOs are experiencing a ‘Digital Awakening’ moment. They realize innovative digital technologies viewed as nice-to-have pre-COVID are now necessary. These digital technologies required to navigate the new normal were the same technologies that consistently went underfunded pre-COVID due to more immediate needs such as operations & maintenance and accumulated technical debt as a result of years of customizing large enterprise applications. The time is now for CTOs and CIOs to take a severe look at intelligent automation technologies creating digital workflows to connect disparate systems, gathering insights from complex unstructured data, and creating digital engagement channels to connect with customers.
How will businesses define digital transformation in a post COVID world?
[MW] Digital transformation is not just about using more digital technology in your business. It involves a cultural change to be willing to experiment, challenge the status quo and see failure as a chance to learn. In other words, taking techniques such as lean and agile from the software development teams and applying them across the whole business. Businesses taking this approach will be able to adapt quickly and will be much better suited to the uncertain times ahead.
[CH] The term digital transformation has been around for some time. Until recently, the difficulty has been in defining what it is and how we measure for success. Due to globalization and technology innovation, we can now support complex SaaS, IaaS, PaaS and iPaaS environments with Digital Workflow Transformation platforms serving as a ‘connective tissue’ working across legacy on-premise and modern cloud applications while accounting for human-in-the-loop activities and handling complex data volume. Creating this level of the digital workflow was a pipedream just five years ago because to achieve real Digital Transformation, we needed an equilibrium among supply and demand.
Pre-COVID, we had the supply of technology to deliver Digital Transformation, but we lagged on the demand side. COVID has served as the catalyst for the demand to catch up to supply. People that never thought they would engage in a virtual doctor appointment are learning to appreciate the efficiency of telemedicine. Governments are rewriting policy to allow for prescriptions to be filled through mail-order using patient mobile identity verification technology.
Parents and children that never thought much of distance learning have acclimated to the virtual classroom. Same goes for grocery delivery, digital banking, and other creature comforts that previously only thought of as a physical touchpoint activity. These ‘societal digital muscles’ that we’re building are reshaping behaviours that will persist into the post-COVID world and force organizations to double-down on their digital transformation strategies and investments. This means digital transformation will no longer be viewed as an innovative ‘leapfrog’ strategy rather a ‘table-stakes’ baseline initiative.
[MC] In a post-COVID world, digital transformation projects will likely be accelerated in response to market conditions. Some of these projects may be implemented as initially designed. In contrast, other projects may be stripped back to the core so that they can be rapidly deployed and move the needle in terms of how an organization works. Some of these projects may be migrated from being bespoke to using out-of-the-box SaaS applications that can be implemented quickly. Other projects may be migrated to scalable cloud platforms to support agility and rapid scaling as ambitious organizations look to grab market share and emerge stronger from the present situation.
Traditionally, a digital transformation initiative might have required the help of specialist consultants, extensive market surveys and expert staff to devise the right technological approach to support new business processes and models. Companies might have been looking at a nine to 12-month time frame overall, but that just isn’t possible now. Thanks to the unpredictability businesses are facing in regard to how and when recovery will happen; they don’t have the luxury of time so the process will have to be shortened and completed at a lower cost. However, there is no reason IT teams shouldn’t have confidence in their ability to achieve this. You only have to look at how successfully they adapted to the unplanned and unexpected shift to working from home for proof.
Will we see more investment in automation, AI and RPA to gain faster tangible returns on investments?
[VK] Automation and AI are already taking centre stage in the current business landscape as they can quickly help IT organizations increase IT agility and efficiency, offering immediate returns as well as long-term strategic benefits. Automating repetitive IT tasks, for example, allows IT teams to focus their efforts on more valuable work.
Automation, coupled with AI, can also alleviate the strain now put on telco providers and IT teams to deliver seamless performance and enable remote cooperation. Streamlining incident resolution will be fundamental – that’s where AI is set to add business value. AIOps, for instance, applies machine learning to gather and analyze vast amounts of data, pinpoint the root cause of performance issues and promptly resolve them to keep the business-critical infrastructure running, as well as ensuring end-user support and satisfaction.
[MC] Investment in AI and RPA will undoubtedly continue to rise. One of the major issues affecting IT is the shortage of skilled labour, especially in security. A recent survey found that 85% of organizations [https://www.gigamon.com/resources/resource-library/analyst-industry-reports/ar-cyberedge-2020-cdr-report.html] went into 2020 short of security resources, a situation that has only been made worse by the shift to WFH, which led to a rapid increase in the frequency of security attacks. Increased use of AI and RPA is one of the best ways to counter this shortage.
[CH] Several macro trends are serving as tailwinds to drive increased investment in AI and RPA. First, global system integrators, such as KPMG, have sized the market at $232 billion by 2025, representing significant YoY growth. Second, Gartner contends that citizen developers will outnumber professional developers four times by 2023, meaning the software will be easier to use, and we’ll have vastly more ‘developers’ to scale the software. Third, several platform companies, such as Microsoft and Kofax, have acquired and converged AI and RPA in a bid to ‘consumerize enterprise software’ or make it easier for the business community to design and develop enterprise-grade digital workflow automation software.
Lastly, the 2020 Kofax Intelligent Automation Benchmark Report, a study conducted by Forrester Consulting, which pulsed 450 automation and AI decision-makers, and 450 individual contributors in North America, Australia, France, Germany, Hong Kong, Japan, Singapore, Sweden and the UK, found 98% see tremendous value in a single-vendor integrated platform approach over a ‘best of breed’ unintegrated point solution approach resulting in high levels of technical debt and delayed business success. All of these factors point to a future where investment in AI and RPA is going to become increasingly critical to the success of corporate Digital Transformation strategies.
[MW] Possibly, although bear in mind that automation is a long-term strategy that doesn’t necessarily provide short-term returns. The process changes and the technology required to automate requires time, effort and money – which may be in short supply at most companies for the near future. A pessimistic view is that some companies that have already invested in automation and AI could use the pandemic as an excuse to get rid of humans. At Bright, we believe the purpose of automation and intelligent software is to free people from the boring stuff, enabling us all to focus on what we’re good at – being creative. Hopefully, this view is shared widely, and companies will see it as a chance to innovate rather than just save money.
Will COVID-19 change what it means to be a CTO?
[DL] It will undoubtedly change the focus. UK plc has typically made a drive for continual innovation in its outward-facing applications and services, to keep up with consumer demand and a relentless ever-changing market. However, their budget can only be spent once, and that is often at the expense of the underlying infrastructure, which as every infrastructure tower owner will tell you, is always creaking at the seams.
If ever there has been a time to get these issues on the map, it is now, but a response and solution is needed immediately and must be adhered to. I have experience of organizations going through vast, P&L impacting disruption, who promise to adopt and run with their new systems, only to level off then and drop back into their previous cycles of working. It will be a test of the mettle of many CTO/CIOs both during and after this situation to see who can drive through the right changes to make sure organizations are ready for the next one.
[BB] CIOs and CTOs have also realized that they don’t need a five-year IT roadmap. Where previously the C-Suite will have considered implementing IT projects in a matter of years, these can now take place within a matter of weeks and months. We have seen businesses worldwide digitally transforming their organization practically overnight, so the development of IT projects will be accelerated as we emerge from this crisis.
If this period has shown us anything, it’s that the need for agility in IT projects is crucial. IT infrastructure needs to be agile and adaptable to adjust to future spikes in the number of workforces working remotely. Once international lockdowns are lifted, CEOs might want to reduce office spaces as more employees work from home, adding additional pressure to IT infrastructure. Businesses need to get ahead of the curve and start planning for a continued remote working system and bring in new components to their IT architecture.
[MC] The COVID-19 pandemic will produce winners and losers within all industries. The companies likely to emerge stronger from this situation are not just those who have the necessary financial resources, but who are digitally engineered; those who have the infrastructure and resilient processes in place to change and adapt and the right mindset to drive innovation.
Now we are entering the new tomorrow, the majority of businesses will have successfully adapted and stabilized their operations. The achievements of IT teams over the past few months have been remarkable, as they have successfully helped their businesses adapt to a whole new way of working. Moving into the post-COVID world, a ‘fluid workplace’ model is likely to prevail as working from home becomes a permanent feature of businesses and government organizations. As long as IT teams remain focused on security, resilience and agility, they will be well-placed to deliver the applications and initiatives to emerge stronger into the new tomorrow.