You’re the CIO or other IT leader with budgetary responsibility. The CEO (or CFO) realizes that the Coronavirus has rapidly tanked the economy, and as a result, it’s time to slash costs. Where do you cut?
The conventional wisdom during an economic downturn is to spread the budget cuts across the organization. Since IT is a cost center, it has always been responsible for more than its fair share of cuts.
Just one problem: there is nothing conventional about this downturn. The Covid-19 pandemic has been writing its own rules, and the impact on businesses large and small are dramatic and unprecedented.
Your organization’s response, therefore, is also likely to be unprecedented. Don’t jump to conclusions informed by conventional wisdom.
The role IT plays in the pandemic response is likewise unprecedented. Here are some pointers for navigating the maelstrom.
Mind the Strategic Shifts
The Coronavirus downturn fundamentally changes how executives must evaluate the risk, urgency, and importance of their decisions.
When the survival of the enterprise is on the line, leadership must take risks they would otherwise avoid in order to keep the lights on – and to position themselves to succeed after the crisis passes.
In addition, some actions are now far more urgent than they were a mere two months ago, while others have dropped in urgency. How mission-critical a particular decision might be has also changed
All of these strategic reevaluations impact the IT organization perhaps more so than any other part of the enterprise.
The pandemic is like a kiln. We put our organizations in, and all the bits that require in-person interactions are burned away. The ceramic that remains – what’s holding our organizations up – depends entirely on technology.
IT has certainly taken on new importance in the work from home (WFH) era, not simply because employees leverage technology to WFH, but because every interaction, from front-line customer interactions to routine back-office data processing, now depend entirely on IT.
In fact, digital transformation – the software-empowered reorganization of the enterprise to better align with customer demands – has shifted from a long-term strategic initiative to a short-term tactical must-have.
IT Decision Making during a Pandemic
You explain to the CEO or CFO how mission-critical IT has become as a result of the pandemic, but they expect you to cut 30% from the IT budget regardless. So you sharpen your pencil and go to work.
Let’s start with cybersecurity. Can we cut there? Just one problem. Bad actors have been taking advantage of the chaos. Better spend more on cyber just to be sure.
What about that modern IT infrastructure investment you’ve been making? Maybe it’s a cloud-native strategy centered on Kubernetes. Or perhaps hyperconverged infrastructure combined with judicious cloud migration. Hybrid cloud or hybrid IT strategies fall into this category as well.
The reason it made sense to invest in such modern infrastructure was because it would empower your organization to deal with dynamic, often unpredictable business demands for application functionality. A careful mix of on-premises and cloud-based infrastructure also promised to help you manage expenditures while simultaneously improving your regulatory compliance regimen.
On second thought, the strategic benefits of modern IT infrastructure are just what you need to weather the Coronavirus storm and come out stronger on the other side. No cuts here – better double down instead.
That leaves you with that difficult digital transformation initiative. If only it were as simple as buying new technology, but it’s not. It requires rethinking organizational structures while collaborating cross different teams within IT and diverse business units across the organization. Given the open-ended nature of the effort, its all-in cost has been difficult to manage.
Covid-19 has now changed the digital transformation equation. Supporting both customers and employees with digital capabilities that leverage that oh-so-difficult reorganization is now both urgent and mission-critical.
Bottom line: accelerating and reprioritizing digital transformation efforts may actually reduce the cost of the initiative long-term, but this quarter? Time to spend more.
Where to Cut?
So far, not so good. Instead of reducing the IT budget 30%, you’ve just upped it 10%. The boss won’t be happy.
It’s time to rethink how to go about reducing IT expense. What cost-saving opportunities does the Coronavirus open up today?
The first target: WFH changes. The organization can no longer afford to keep all that office space open and waiting for people to return. It’s time to cut all the IT infrastructure that supports the offices that the new normal won’t need. On the chopping block: printers, networks, videoconferencing equipment, and any other capability that WFH people won’t need.
That plan to refit office space to observe social distance? Too expensive. Permanent WFH for much of the staff is a better plan. If all this office infrastructure cutting means a permanent WFH workforce, then so be it. We’re not simply waiting for the new normal, we’re creating it.
So far, so good – but nixing that fancy videoconferencing setup or spaced out cubicles is merely a drop in the bucket. Given the priorities of the pandemic as well as expectations for the new normal that follows, where can you cut?
The answer: legacy. Legacy applications in particular have long sucked the life out of the IT budget. It’s time to shift funds away from the maintenance and support for older applications. Instead, invest a portion of those dollars into modernization.
However, you can’t approach modernization the way that organizations have for decades now. You must approach modernization in an entirely new way.
Gone are the days of 2-year forced marches involving busloads of consultants pounding out multimillion-dollar modernization monstrosities. Today, your approach to modernization itself must be fully modern – lightweight, scalable, and modular. And yes, you should probably keep your mainframes.
Modernization has always been an IT priority, but now it’s both urgent and mission-critical. It’s time to rethink how the enterprise delivers core services, leveraging that modern IT infrastructure you decided to support.
Part of this modernization rethink is how the organization creates and updates its bespoke applications. App dev approaches that cost too much and take too long are out the door – waterfall to be sure, but also on the chopping block: older Agile approaches that have long overpromised and undelivered.
In their place, it’s time to move to devops, and a CI/CD model that delivers better application functionality that is both dynamic and scalable – two mission-critical priorities of the Covid era. True, devops is more about collaboration than technology, but now is the time to get with the program.
In addition, it’s time to make a big (or bigger) bet on low-code – not instead of devops, but supporting it. Today, there is no better way to deliver new application functionality in a matter of days, when the same functionality would have taken weeks or months before the pandemic.
The Intellyx Take
Can you really save money by rethinking and reprioritizing your modernization efforts? The answer will depend upon many different factors. It’s clear, however, that such a bet comes with a higher risk than you were perhaps able to tolerate before.
Remember, however, that the pandemic has shifted how organizations evaluate such risks. Given all the factors to consider in this article, betting more heavily on rapid modernization may be a risk that you now have the singular luxury to take.
If your CEO and CFO aren’t buying your argument, be sure to remind them that surviving a downturn isn’t the company’s only strategic priority. It must also lay the groundwork for gaining market share or other business advantage once the crisis has passed.
The difference between winning long-term and simply surviving but ending up at a market disadvantage – or failing altogether – has everything to do with where you place your chips now, in the early phases of the downturn.
Given the particular importance that IT plays both today and tomorrow, how you budget for IT over the next few quarters will in large part determine your organization’s long-term success.
© Intellyx LLC. Intellyx publishes the weekly Cortex and Brain Candy newsletters and advises business leaders and technology vendors on their digital transformation strategies. Intellyx retains editorial control over the content of this document. At the time of writing, no parties mentioned in this story are Intellyx customers. Image Credit: Robert Couse-Baker.
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