Digital transformation is top of mind among CIOs and senior IT executives as COVID-19 pushes companies to accelerate planned and unplanned re-engineering of their IT environments to meet ever-increasing demand from the digital marketplace. According to the Flexera 2021 State of Tech Spend Report, the pace of transformation is going to continue to pick up speed throughout 2021.
Top priorities for IT teams in 2021 are digital transformation, cybersecurity and cloud/cloud migration. Customer experience also near the top, indicating the continued importance of a customer-centric attitude aimed at increasing customer retention, encouraging repeat business and driving up revenue. The pandemic and recession have also driven a much greater emphasis on cost savings vs. our findings from 2020.
Get the full results from the Flexera 2020 State of Tech Spend Survey.
The COVID-19 pandemic has forced IT executives and teams to accelerate digital transformation efforts to support major changes in how and where people work and to mitigate negative impacts of the economic downturn. The survey asked about changes organizations plan to make in investments for their IT workforces. Their responses indicate the pandemic is quickening the pace of digital transformation. Some went as far as to say that what they expected to accomplish over 24 months had to be done within just a few weeks to accommodate work from home. Organizations scrambled to get laptops, software-as-a-service (SaaS) apps, remote connection, and cloud in place to support the significant increases in remote workers. Eighty-six percent of respondents expect the pace of digital transformation to continue accelerating in the year ahead.
Moving up to business-led IT
The focus on customer experience makes it essential for IT executives to elevate their role and the role of the IT workforce. The traditional role of technology implementer simply doesn’t cut it in the digital enterprise. It’s important for IT to become more of an equal partner in the business.
As an equal partner, IT works closely with all stakeholders to align the organization’s technology strategy with business strategy and corporate goals. IT also advises business units and departments as they evaluate technology solutions and decide how to allocate their respective technology budgets. This is known as business-led IT. Finally, IT participates in technology deployments, assisting stakeholders with implementation concerns and ensuring compliance with security policies and governance issues.
IT executives are enthusiastically embracing business-led IT. However, they admit that they still need to advance to higher maturity levels with respect to aligning IT with the business. When asked to place their organizations into one of four levels of maturity, only 20 percent rated themselves as equal partners in the business—the highest level.
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In responding to business-led IT, CIOs and IT executives continue to balance running day-to-day business operations reliably with providing support for growth and innovation. Without sufficient focus on the latter, IT can lose relevance quickly. To mitigate the impacts of this challenge, it’s important for IT to align itself as closely as possible with business needs. As the figure below shows, central IT departments allocate 64 percent of their budgets to running the current environment and 36 percent to growth and innovation. Industry analysts often estimate the costs of running the business can be as high as 70 percent of the IT budget with only a 30 percent investment in growth. However, this ratio can vary based on market dynamics and economic conditions. Projects also typically go through a lifecycle, starting in the innovation category and then moving into the running-the-business category when they mature.
Investing in remote workers
Digital transformation is changing the mix of skill sets needed. Organizations have been assessing the IT workforce and identifying where investment is needed. Last year, the expectation for the top investment focus to be related to skilling, upskilling and re-skilling to ensure their people have the right knowledge and expertise. Organizations are rethinking their staffing investments for 2021 because of the pandemic and the expectation that employees will continue to work from home. As the chart below shows, investing in remote workers has moved to the top of the list of planned changes to IT staffing investments. It was in sixth place last year. Investing in upskilling and re-skilling of existing employees moved down slightly to the second and third priorities. Outsourcing is still in sixth place. However, more organizations are now planning to reduce investments in outsourcing and fewer are planning to increase investments.
2021 will be an interesting year for organizations digitally transform their businesses and move up to their new role as partner in the business. The challenges are many but the rewards are compelling. To meet those challenges, IT executives will continue to take action in a number of areas including technology adoption, skillset acquisition and budget allocation, and prioritizing their efforts to ensure maximum impact.