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CIOs Weigh Economic Pressures on Tech Investment Strategies

Pressures like inflation, rising labor costs and vendor risks may be straining budgets, but investments in technology modernization aren’t likely to slow down, a panel of CIOs said.
Suman Bhattacharyya
Contributing Writer

Economic pressures, including the possibility of a recession, are pushing CIOs to be more strategic about where they’re deploying their technology dollars. This might mean looking at the ensemble of tech investments to determine what could be scaled back, reviewing contracts with vendors, or reevaluating IT requirements in response to the growth of remote and hybrid work.

Technology leaders say they’re committed to investing in digital transformation. John-David Lovelock, distinguished research vice president at Gartner, wrote in July that current levels of volatility seen in both inflation and currency exchange rates are not expected to deter CIOs’ investment plans for the rest of the year. Gartner projects worldwide IT spending to total $4.5 trillion in 2022, an increase of 3% from 2021, growth at a much slower pace than in 2021.

A panel of CIOs in a discussion on the CIO Professional Network said they were pushing forward with tech modernization plans but looking to find efficiencies as IT budgets come under scrutiny. Here are their key recommendations:

There’s no shortcut to digital transformation. 

Harsha Bellur, executive vice president and CIO, said his firm is in the process of upgrading its digital infrastructure to ensure seamless transactions in-store and online. It’s a strategy aimed at generating longer-term benefits for the company and should be prioritized when making technology resourcing decisions, the company concluded.

“We have a specific strategy of working on our customer experiences and that entails a lot of shifting and changing our tech stack,” said Bellur. “We have some very specific objectives that we plan to accomplish in terms of customer new customer acquisition, customer experience and personalization.”

The company doesn’t want to compromise this strategy by undercutting any plans and investments it has made or is planning to make in this area, he noted.

Christopher Davis, CIO, said regardless of pressures on technology budgets, the company is investing in mobile enablement, which is part of a longer-term strategy to improve customer experiences.

Review IT engagements and renegotiate where possible.

Robert Young, executive vice president of technology and CIO, said he was reviewing all commitments to find efficiencies. 

“[We’re] taking a look at all the solutions and making sure that we’ve rationalized across the different business units and taken stuff down,” he said, noting that the company replaced some systems with more cost-effective alternatives. 

Companies should examine possibilities to renegotiate contracts, he noted. One key area where he was able to reduce costs was cloud-related spending. Indeed, it’s been reported that organizations that don’t effectively track and monitor cloud costs overspend by an average of 40%.

“You have to be very careful of the cloud strategies and adoptions out there that end up costing you a lot more,” he said.

Consolidating capabilities within a smaller number of software products can be part of a broader effort to manage technology costs. For example, some organizations have switched to Microsoft Teams for video or audio-based communication and eliminated the need for a separate subscription to the Zoom platform.

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“Microsoft Teams has kind of caught up to Zoom,” said Stephen Greco, CIO and chief operating officer. “Everybody is happy on Teams now, so there’s some cost cutting. It’s not necessarily driven by the pandemic, but just good business practice.”

Monitor the health of vendors, and lean on relationships to ensure you can assess the fallout of any challenges they may be facing.

Vendors, who may be experiencing economic pressures, might pass some of those costs on to customers, leading to unforeseen costs, noted Bellur.

It’s unclear the degree to which vendors will be able to increase prices. Service providers may be able to raise prices for better-off enterprise customers, but the rate increases aren’t likely to be as high as inflation, Rob Pritchard, senior analyst recently told industry publication Tech Monitor.

Companies may be seeking to mitigate the effects of vendor risks or other pressures on their business, but they may not have a lot of leverage for influence beyond maintaining healthy relationships.

“You really have to get ahead on the relationship side. Call your account representative, call their leadership, and really understand where their head is,” said Bellur.

During a talent shortage, consider tapping third-party IT service providers.

Gartner estimates that IT services are expected to grow 6% in 2022. Many tech leaders see IT services as a way to extend their reach where there are gaps, including cybersecurity and online training, noted Mitch Turner, senior director of information technology.

Others noted that using a third-party managed services provider can be cost-efficient for certain tasks.

“For anything that’s not a core competency, we would look to a service provider because they’re going to be better, faster, probably cheaper than we could possibly do it,” said Greco.

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