CIOs and other technology professionals had grown accustomed to regular budget increases as technology revolutionized company operations, plans before the COVID-19 epidemic. With the introduction of COVID-19, businesses’ attitudes about technology and corresponding investments have shifted dramatically.
Based on data from Deloitte’s 2020 Global Technology Leadership Study, we look at broad trends in technology investment. We also look at the short- and long-term effects of COVID-19 on technology investments, as well as the spending patterns of technology vanguards, or enterprises that are ahead of their competitors. Finally, we rethink how we spend money on technology and how we allocate capital.
The 2020 Global Technology Leadership Study examined how enterprises, their technology departments, and technology executives have evolved over time. More than 50% of the respondents said their budgets increased year over year between 2016 and 2020, while others said their budgets stayed the same. However, we gathered our 2020 data before COVID-19 triggered an unparalleled humanitarian and economic crisis with immediate and far-reaching implications for corporate strategy.
Many CIOs, especially in sectors where stay-at-home rules limit physical connection, such as travel and hospitality, food services, retail, sports, and entertainment, have to make significant budget cuts. Many technology executives observed that the epidemic provided a chance to immediately re-calibrate technology investments and, in some cases, accelerate current investment plans.
Technology Pioneers’ Spending Habits
In the categories of vision and strategy, technology, and market leadership, the study identified a subset of firms that were more sophisticated than their peers. We discovered that these forward-thinking companies, which we refer to as technology vanguards, apply progressive thinking to technology investment plans.
In general, baseline firms tended to prioritize cost-cutting and efficiency projects, whereas technological vanguards tended to prioritize innovation, expansion, and customers. The growth orientation of Vanguards certainly pushes them to invest in the future, which we expect to continue when the economy recovers. Because of the strategic relevance of innovation and growth to the broader business, technology vanguards devote a higher percentage of their technology budget (20%) to innovation than baseline companies (15 percent). These elite companies plan to spend 30% more on innovation over the next three years, compared to 23% for baseline companies.
In general, baseline firms tended to prioritize cost-cutting and efficiency projects, whereas technological vanguards tended to prioritize innovation, expansion, and customers. The growth orientation of Vanguards certainly pushes them to invest in the future, when the economy recovers. Big elite companies plan to spend 30% more on innovation over the next three years, compared to 23% for baseline companies.
Technology investing Practices are being Rethought
Traditional technology investment processes can result in segmented, inflexible, and opaque investments. Budgeting, accountability, capital allocation, and benchmarking methods should all be altered to optimize the value of IT investments.
1.Planning and budgeting :-
Project deployment can take months or even years due to extensive planning, and complex worklists with stringent deadlines, as well as solution development, and testing. The world has changed by the time IT completes the project, and the company may now be facing new challenges. That’s where technology trailblazers distinguish from the pack.
Prototyping, design, and testing are becoming the standard for many technological pioneers. Their delivery teams, which include both business and technical stakeholders, strive to shorten the time between idea and implementation. Additionally, also release the solution in stages, and promptly course-correct based on customer feedback and how the product is used.
Smart technology executives are altering their investment policies to give cross-functional teams more autonomy. This allows them to optimize the value produced from technology investments while also holding them accountable for doing so. They’re also more likely to be involved in monitoring, course corrections, and money reallocation when there are several competing possibilities.
2.Collective responsibilities and ownership :-
Historically, the CIO and IT staff were solely responsible for the success or failure of technology deployments. Project success and failure are shared as businesses move away from segregated projects.
3.Balanced Capital Investment :-
COVID-19 emphasized the importance of organizations being lean and resilient. Many IT executives have been requested to reduce major chunks of their budgets and reallocate existing investments. This creates more robust technology environments and improves infrastructure and communication tools. Defensive investments, which are tied to the security and maintenance of the company’s assets, are vital, but they’re a table-stakes requirement for business executives.
Business innovations and other aggressive technology investments—those that provide and enable new prospects, business models, and income sources—are also being prioritized by savvy CIOs. According to research, high-performing organizations spend a disproportionate amount of budget resources on business growth, while others prioritize business protection.
4.Considering benchmarks as a reference :-
Some businesses only rely on industry standards to determine whether they are overspending or underspending on technology and to disburse technology budgets. These benchmarks should be used as a reference, not as dogma, as the distinctions between industries blur.
Corporations in the same industry can have distinct business strategies and models, resulting in diverse investment profiles. It’s risky to use benchmarks without context. It’s critical to match spending to the company’s overall strategy, current and future competitive landscape, and technological goals.
Insights into the future : 2022 and beyond
The pandemic’s influence on technology budgets in 2020 was not as large as previously anticipated. Although many finance executives are skeptical about how rapidly company revenue will return to pre-crisis levels, they do expect significantly higher levels of automation and cloud computing, as well as more remote work. This indicates an increase in technology spending, according to CFO surveys taken in the second and third quarters of 2020.
While the pandemic impacted several industries’ technological investment growth, there is an advantage. Executives now have the chance to make a long-term difference in how they approach technology investments. This will boost corporate agility, making operations more efficient, and ready to respond rapidly to whatever comes next.
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