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As business leaders get used to the discomfort of uncertainty and digital channels become key to survival, the surge in technology investment required to adapt to the Covid-19 coronavirus crisis means CIOs will need to deal with a number of implications in the longer term.
At the same time, technology leaders are enjoying an unprecedented era of influence, with professionals who are capable of navigating current and future business demands becoming more visible than ever.
These are some of the key findings of the 2020 CIO Survey published by recruitment and technology company Harvey Nash and consulting firm KPMG, which cover the before, the onset and the ongoing effects of the health crisis on technology leadership across the world.
Some 4,200 technology leaders participated in the study, which ran in its first iteration in December 2019. The study was paused in March 2020 and resumed in May, running until August to cover themes relating to the pandemic.
According to the study, only three in 10 organisations had digital business strategies in place prior to Covid-19 and sufficient infrastructure to deal with the crisis. These digital leaders already had technology such as distributed cloud, software-as-a-service (SaaS) platforms, artificial intelligence (AI) and automation in place. These better structured businesses continued to invest in technology to make them more resilient in the crisis, while the majority of businesses cut back on investment in emerging tools, creating a growing digital divide.
However, investment in technology to deal with the adaptation required for the pandemic was inevitable. The IT leaders polled reported an average spending increase of 5% of their budgets to deal with the Covid-19 crisis to pivot business models and to ensure security, as 41% reported a rise in cyber security incidents, particularly spear phishing and malware attacks. Remote working was also a big area of focus, as 86% of organisations reported enabling a significant portion of their staff to operate from home.
According to the study, IT budgets grew at a greater rate than at any point in history, equating to around US$15bn per week during the first three months of the emergency, particularly in sectors such as power, utilities, healthcare and government. The study noted that at the start of 2020, investment in technology had remained at an all-time high, with 55% of technology leaders receiving a budget increase, mainly to focus on medium- to longer-term strategies – something that changed considerably after the start of the crisis.
The sudden and unplanned increase in capital expenditure (capex) and operating expenditure (opex) to deal with immediate priorities is presenting organisations with a headache, with longer-term investments being largely reviewed as decision-makers are keen to prove return on investment or deliver savings through technology. The sustainability of the vast investment made in the past few months is likely to be one of the most pressing themes for CIOs in the months to come, according to Steve Bates, principal at KPMG’s US advisory practice and global leader of KPMG’s CIO Center of Excellence.
“I don’t think huge opex growth is sustainable and there will be a big challenge coming from a lot of CFOs [chief financial officers] who will come back and question whether the business is optimised, and if these types of cost can be sustained. I think the answer, in many cases, will be no, and that level of spike will have consequences to the ongoing budget, so hard choices will have to be made,” Bates told Computer Weekly.
When it comes to the budgetary increase by organisation size, the survey noted the biggest percentage increases in headcount and budgets over the next 12 months were likely to be seen in smaller organisations, with 46% reporting plans to increase spending. The research noted that larger organisations have more capacity to absorb shocks and distribute them across the enterprise, and that’s reflected in the 30% of IT leaders in that space who reported raised budgetary expectations.
A stark difference
In general terms, customer experience investments are a top priority when it comes to tech investment priorities of the business polled for the survey, followed by upgrades to the cloud which acts as the digital backbone and the underpinning infrastructure (see “Investment priorities” chart below).
Large-scale implementations of SaaS platforms represent 23% of the activity reported by survey respondents, up from 7% last year, with one in six organisations implementing such platforms in the past 12 months. According to the research, enterprise-wide SaaS is “exploding”, particularly software with well-defined risk boundaries. In this scenario, Oracle, Salesforce, Workday and Microsoft are cashing in and firmly entering surge mode during the pandemic (see “Crisis response” box below).
Among the digital leaders – respondents who reported being “very” or “extremely” effective at using digital technologies to advance their business strategy – distributed cloud adoption is at 42%, compared with 16% at other organisations. SaaS adoption at these advanced companies is at 34%, compared with 18% elsewhere, while automation is at 13% in digitally-able businesses, compared with 4% in other organisations.
Business decisions typically require at least some degree of future planning and the survey shows that most leaders are struggling to think too far into the horizon. Almost six in 10 (59%) respondents feel they will be unable to accurately forecast for long-term planning decisions for at least three months, and almost one in 10 think it will take a year or more. According to the survey, the current aim is to optimise IT estates, reduce technology spending and put building blocks in place for other types of projects in the future.
Steve Bates, KPMG
However, a significant chunk of respondents (30%) said they plan to forge ahead as they already feel that they have an accurate view of the future. The survey found UK-based leaders of large organisations in the power and utilities segment are the most likely to feel able to see the direction of travel in the short term.
Alluding to the digital divide created by the accelerated sophistication of technology setups in more digitally-able organisations, Bates said the difference between businesses that were already further down the road and have chosen to accelerate even in the current environment, compared to those that were fairly nascent in terms of digital transformation or hadn’t yet started on that process and had to pull back on spending, will be stark – and very noticeable.
“The consequences of those two decisions are pretty profound and are going to create an even bigger competitive divide between digital leaders and those that are not. There will be more companies that fail or fall further behind as a result of that. There will be clear winners and losers,” the consultant noted.
In the current context, Bates predicts that CIOs who cannot articulate the value of increased investment in business terms will have their careers severely impacted. “Your credibility as a CIO in this environment revolves around the ability to sit in front of the board and clearly explain the vision of where the value of money is being spent, and how it’s moving the needle for the business,” he said.
“If you cannot do that, you’re putting yourself in a position where it’s highly likely your budget will be cut and your efficacy as a CIO will be challenged,” he pointed out. According to the survey, many CIOs will need to find a way of rationalising and taking out old costs to support a more digitally connected workforce and marketplace.
A double-edged sword
Referring to the often mentioned view that the pandemic has been the greatest accelerator of digital transformation, Bates stressed that there’s “simply no going back” for CIOs.
“In many respects, Covid has really accelerated digital transformation by years and fundamentally changed the technology landscape with the adoption of these new ways of working, which puts the CIO in a position of influence that they have not experienced in potentially their entire career, but certainly for decades,” he said.
Steve Bates, KPMG
While some digital leaders will be increasingly showing their advantage in terms of preparedness to deal with the pandemic, Bates noted that most businesses are still stuck in firefighting mode and trying to adapt to the new challenges presented by the pandemic. In this context, tech leaders have had a lot more say in the business in recent months, as board members with responsibility for big pieces of technology spending, such as chief marketing officers and chief operating officers, seek advice and support from CIOs or CTOs on new or existing programs.
However, this current surge in influence has not translated into board membership, which for CIOs is down from 71% in 2017 to 61% in 2020. “The big thing we’re learning from talking with CIOs is that board membership hasn’t accelerated to the same level their influence has. We’re finding that while they may not be seeing growth of [executive positions], what they are really excited about is the level of influence they have,” said Harvey Nash chief executive Bev White.
Elaborating on what that perception of IT leaders to themselves and the business means, White noted that at the start of the pandemic, CIOs were mostly busy with getting people to work from home, ensuring system reliability and preventing cyber attacks. As time went on and the crisis continued, their role switched into more strategic imperatives. “It’s all about finding new ways of improving customer and employee experience and opening new digital ways of engaging with both communities,” she said.
When it comes to improving the way companies deal with employees, IT leaders are also having to consider factors such as mental health, with 84% of the CIOs polled concerned about this. The survey found that IT leaders are also actively looking to address that challenge, with seven in 10 of those who reported such concerns introducing programmes to support their team, up from just over 50% before the pandemic.
“CIOs are now very much working towards that future direction, and working on business strategy at the same time, so they’re not waiting for the business to be modified and to adapt, they’re actually helping shape it as it goes,” said White, adding that this new environment creates a range of opportunities for IT leaders.
“I think what’s going on here is that [CIOs have] much more interesting work, with a much longer time horizon for projects. And that is very much happening alongside [business] people, as they shape the direction of the business evolution, rather than being the receiver of the strategy and then having to interpret it into technology,” she pointed out.
The influence that CIOs are now wielding is, in some respects, is a double-edged sword, according to KPMG’s Bates, because there’s a huge demand on them for rapid instant technology scale. “Those that were already well-positioned, having embraced cloud, mobility or modern architectures, made it look comparatively easy to rapidly transition to this new world for their workforce and their customers,” he said.
On the other hand, Bates noted that IT decision-makers working at less advanced organisations had to do what most would have said was impossible just a few months ago, and worked around the clock to make that transition to digital happen, which isn’t sustainable. “The challenge for a lot of CIOs is that they’re going to have to have a very different operating model, and a different team,” he said.
In the crisis response in the months to come, the Harvey Nash/KPMG survey identified four models:
- Hard reset: Representing 7% of the organisations polled, this is where recovery will take a long time after long-term economic damage. The study noted this includes the travel industry, where businesses will struggle to recover due to permanently lowered demand for their offerings, insufficient capital to ride out an extended recession, as well as poor digital transformation execution.
- Transform to re-emerge: Applicable to 38% of businesses polled, and typically found in sectors such as retail with stores going online, this relates to organisations that will see business models changing along with how their customers want to interact with them, with recovery taking place along a protracted path. This will demand requiring capital reserves to transform operating models and cater to new consumer expectations.
- Modified business-as-usual: In this trend, which applies to 26%, and applicable to businesses in segments such as utilities, organisations providing daily essentials that will suffer during the consumer slowdown but recover more quickly as consumer demand rebounds, requiring adoption of digital technologies will bring in new levels of performance and improve customer engagement.
- Surge: This model is applicable to companies in segments such as technology, which scale rapidly to meet changes in consumer behaviour present due to Covid-19. Such companies, like Zoom and Skype, will need to seek to protect the gains they have made during the pandemic and decide on elasticity of what they have gained. These represent 29% of the organisations polled.
“They’re going to have to step into a role of being more of an architect and less of an operator. For some CIOs, that is not a large leap, but for traditional operators, that is going to be a very significant challenge,” added Bates.
On the traits of CIOs who are likely to weather the crisis, Bates said they tend to be extremely methodical and not just have a vision, but are deliberate about executing on it, and are constantly playing that back to the leadership. “They’re their customers, the progress they’re making on the execution of that vision, which is always very clear. So they have credibility that goes along with their influence,” he explains.
The other element of those who manage to hold on to their influence, according to Bates, is that they’re changing their IT operating model fundamentally so that it can run at different speeds. “Traditional IT operating models are very monolithic, so it’s hard to change them,” he noted. When it comes to how this increase in influence will play out in the years to come, the consultant believes there will be a large portion of CIOs who “get” that and step forward and continue to wield the influence they are now enjoying, but not all leaders will be able to do that.
“I think there will be a portion who will retrench and will definitely have career implications as they’re not going to get the type of assignments they would like. But for those who do get and maintain employment, it’s a better time than ever to be a CIO,” he said.
A split of roles
Considering that CIOs usually tend to be classed as more business-minded or technically-focused, Harvey Nash’s White observed that the industry is starting to see a split of roles. “There are people who are very good operationally, in keeping the lights on and ensuring the systems are operating, that the video conferencing doesn’t get stuck. The second type is a more strategic CIO who understands the language of the business and is more interested in how, for example, AI can bring in more efficiency, because they understand the actual business processes,” she said.
“Before, you may have had a CIO who had the ability to do one or the other, and have other people in the team who could fill in the gaps for them. We are now seeing two types of CIO emerge: the business-savvy type and those who have to keep the business running. Both are equally important, but there are choices to be made,” White added.
Bev White, Harvey Nash
In that scenario, White noted that there will be more clarification of the role of the chief information officer and the chief technology officer. “This was very blurry before, and [the roles] were almost used interchangeably. But now it is clear that both roles are really important and essential – one carries the language of the business and the other talks technology. They can bridge the gap but need each other to get the job done,” she said.
However, White concedes that it will not be always possible for a company to have a CIO and a CTO. While larger businesses will increasingly see the value of having both functions and the profile of types of professionals becomes clearer, there will still be a place for the so-called “hybrid” professionals in mid-sized and smaller businesses because they can’t afford to have both.
Those hybrid IT leaders will face a number of challenges, however, as they will need to be constantly training themselves to fill the gaps that still remain in their skillset. “But that is obviously a lot harder and takes longer,” said White, adding that the type of training these professionals will be pursuing depends on the nature of the gap. However, most of the learning would be focused on how to create new digital channels on the technical side, while the demand for business mentors and external parties for very specific and short business masterclasses is on the rise, which provide clear paths to putting those new skills into practice.
The diversity opportunity
With regard to how the changes in working models and skills requirements prompted by the pandemic can accelerate progress in diversity, Harvey Nash’s White believes the current trends are opening up enormous opportunities for diverse talent within organisations.
“In the old world, you had to really be present in your employer’s workspace more often than not to do the job. And perhaps, for the main carer of children or the elderly, that wasn’t always an option,” she said.
More than two-thirds of the organisations surveyed in the Harvey Nash/KPMG study feel that being diverse has improved trust and collaboration in the technology team and improved access to the right skills. According to White, the current situation places professionals on the same level playing field, given the current remote working context.
In addition, the perception within businesses that operating from home isn’t detrimental for the business and that it can bring more flexibility and productivity presents a chance to drive real change in terms of the current fabric of teams. “Organisations are building a wider pool of talent because of all these factors. I am thrilled about that, but we’ve still got a way to go,” she noted.
White is referring to the statistics regarding gender balance in this year’s CIO Survey, which suggest that the share of women in technology leadership remains stubbornly low, despite some progress in certain parts of the world. When it comes to female representation among technology leaders in the UK, the percentage sits at 4%. By comparison, women represent 16% of the CIO community in Latin America.
“We still have a lot to learn from other economies around the world in terms of how we can improve things. Accessibility to work is great and you don’t have to be in your employer’s office, or even in the same country, to do the work – and that’s great for diversity,” she said.
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