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Customer-first approach will make 2017 a challenge for Dutch CIOs

CIOs in the Netherlands could see their strategies lead to thousands of jobs being cut as businesses automate

Jobs will be cut in the Netherlands this year as businesses automate customer support.

Meanwhile, CIOs will lose control of a significant chunk of their IT budgets to business leaders.

In 2016, Dutch banks announced plans to axe more than 17,000 jobs over the next couple of years. ING will cut 2,300 jobs in the Netherlands, Rabobank will reduce its global headcount by 10,000 by 2020 and ABN Amro has added 1,500 worldwide job losses to the 1,375 it had already announced.

In the 10 years since the banking crisis, digital technology has taken off and customers now expect instant service 24 hours a day. This has resulted in thousands of bank employees being replaced by IT systems, and automated support is a major part of this trend.

“As their customers embrace online banking, banks can often close a significant number of their branches and lay off staff,” said KPMG in its Banking Systems Survey 2015/2016.

Analyst Peter Vermeulen of Pb7 Research expects even more job cuts in the financial sector. “Digitalisation goes hand in hand with letting a lot of people go,” he said.

No matter how tough the decisions are, CIOs cannot delay digitisation because of pressure from business leaders for IT on demand. “IT has to be a utility to the business,” said Vermeulen.

And while people costs fall, IT spending will grow, with IDC predicting that ICT spending in the Netherlands will grow by 1.3% in 2017.

Losing power

But it is not all good news for IT leaders. CIOs are losing power and budget to business leaders, which could cause them problems, said Vermeulen. “The CIO is the one that is responsible when IT doesn’t work – and that’s a problem when the business gets to choose IT systems and IT doesn’t get involved enough,” he added.

As much as half of an organisation’s IT budget is now being invested by the business, said Vermeulen. “Sometimes people say the CMO is the new CIO, but that’s not true. IT is bought by diverse business units. For example, HR and sales are also spending money on IT.”

This trend has also been noticed by senior IDC analyst Jan van Vonno. “A lot of the IT budget is meant for security, maintenance and existing licences, but new budgets are being cleared for business goals,” he said.

These business decision-makers are more interested in software that can add value rather than technology to keep the lights on.

When it comes to IT spending, software will grow the most in 2017, at 5.5% according to IDC, with most of the growth coming from cloud services. “Business budgets are being spent on software as a service [SaaS] and platform as a services [PaaS],” said Van Vonno. “Business managers are not so concerned about infrastructure as a service [IaaS].

Cloud at tipping point

Use of the cloud has reached a tipping point, said Vermeulen. “Organisations have stopped experimenting with cloud projects and are now thinking how to use cloud strategically,” he pointed out.

For example, ING is investing €800m in a project that will harness digital technology to grow its customer base from millions of customers to more than a billion. The initiative will see the bank – which has more than 34 million customers worldwide – abandon its legacy mainframes and replace them with agile, cloud-based services.

“Businesses are asking for more storage and processing power,” said Vermeulen. “The switch to a cloud infrastructure is to make the organisation more flexible, efficient and scalable, all with lower costs.”

It is not yet clear which suppliers will benefit from such large investments in the cloud. “It looks like organisations will have more suppliers the next couple of years rather than consolidating suppliers,” said Vermeulen. “Dutch organisations will switch from a single cloud model to a multi-cloud model.”

According to the Computer Weekly/TechTarget IT priorities survey 2017, IT decision-makers across the Benelux region look set to receive extra money for cloud services, with 56% expecting a bigger spend in 2017.

Spending on security

Vermeulen said the year would also see a change in the way businesses invested in IT security, shifting from investing to improve and support customer interactions towards spending to stop cyber attacks.

“Ransomware is making the business anxious because of its impact,” he said. “And because of data protection law, organisations have to report data breaches. Hacks are now more visible. This fear is causing tension between serving the customer and securing the organisation. It stops innovation, and that’s not a good development.”

The Computer Weekly/TechTarget IT priorities survey 2017 found that Benelux IT decision-makers were uncertain about their 2017 IT budgets, with 29% saying they did not know whether the IT budget would increase, decrease or stay the same. This compared with 21% in the German-speaking countries, 22% in the Nordics, 26% in France, 23% in the UK and 21% in Eastern Europe.

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