How digital transformation is reshaping the IT budget: The journey of 3 CIOs

Digital transformation is changing how many companies approach work, and is impacting their budget as well. Here are three case studies on how this trend is shifting IT budget priorities.

Written by Conner Forrest, Contributor Oct. 2, 2017 at 7:16 a.m. PT

The lines between business and IT continue to blur, as next-generation technologies change and disrupt the way professionals get work done. Nowhere is this more evident than with the advent and growth of digital transformation.

As methods and workflows move from on-premises to the cloud, or from manual tasks to automated processes, it can become unclear which division of the company is responsible for what. On the financial side of things, that disruption can also affect the IT budget.

Digital transformation is reshaping the IT budgets of many firms around the world. There has been a definitive shift from capex to opex revenue models for many software companies that are now selling their tools as a service, for example. Also, while digital transformation may help firms to save money in some areas, it can also result in some unforeseen expenses.

SEE: IT leader's guide to achieving digital transformation (Tech Pro Research)

The effect of digital transformation on the IT budget will vary between companies. Here are three case studies from three very different organizations.

1. Automating workflows in New York

Two of the biggest steps towards digital transformation taken by the city of White Plains, NY are to begin automating and digitizing existing workflows in its departments, CIO Michael Coakley told ZDNet. And that was for a very specific purpose.

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When a citizen begins working with the government, they often need to work with multiple government agencies to address their needs. However, Coakley said, those interactions may be isolated in that the departments may not be sharing the proper data needed for their individual processes.

"By deploying cloud-based workflow solutions, we created efficiencies between city departments, dramatically reduced the amount of paper used, and enhanced the experience of the party who aims or needs to do business with the city," Coakley said.

Less paper consumption and fewer man hours will reduce costs, but the new levels of automation will cause an increase in the IT operating budget. For larger municipalities with more in-house developers, Coakley said, this could lead to an increase in capex as well.

White Plains has been able to virtualize some servers and is also planning to virtualize desktops, which could help reduce operating costs. But that may be offset by increased opex spend on tools like those from VMware, Coakley said.

"In my case, it's important that I work with the budget department to identify and justify possible increases in my budget lines, making sure I am able to identify and point out the anticipated savings per department or city-wide that will be expected as a result of the deployment of the technology."

Coakley urged other firms looking to digitize to think about the increased bandwidth that comes with the additional tech. To minimise latency, the firm may need to procure additional networking resources. "Obviously there are costs associated with that, and as is the norm, those additional costs typically land on the IT budget," Coakley said.

2. Communication transparency for a pro hockey team

When the Dallas Stars NHL team began its digital transformation journey, it started with the sales team. Dan Doggendorf, CIO and vice president of business operations for the Dallas Stars, explained that the organization moved its call center to a cloud communications platform from Fuze to improve visibility and management.

Beforehand, Doggendorf said, the organization was essentially relying on the honor system to make sure employees were making the calls they were supposed to be making. Now, with a giant screen displaying the correct data, they have much better accountability and can understand what calls are being made, to what number, the frequency of the calls, and their direction.

The system is billed monthly for each user, depending on the plan they've chosen. There are three plans available and Doggendorf said the Dallas Stars are using all three for different tiers of users.

"The opex definitely went up," Doggendorf said. "But, no matter what we were going to do to upgrade the system, something was going to go up, because my system was literally from the 90s, so I wasn't paying anything for it."

Given that the system is cloud-based, disaster recovery for call data is also available, which Doggendorf said wasn't the case previously. Salespeople can also now work from home during inclement weather. So, even though they are taking on a new opex expense, Doggendorf said the organization is getting more access to even more features for the cost.

SEE: New Equipment Budget Policy Template (Tech Pro Research)

Another digital initiative is a document imaging system that has allowed the Dallas Stars to digitize its accounts payable invoices and automate where they need to be sent for approvals based on org charts and signing authorities, Doggendorf said. This has reduced the processing time from three to four weeks down to two or three days.

Within the Dallas Stars, there's no hard-and-fast rule for prioritizing capex or opex expenditures, Doggendorf said, which has made it easier to pursue digital transformation efforts. Despite the money saving, though, he said there will always be an additional cost, and CIOs need to make sure they have buy-in from the end users before they pursue particular digital transformation efforts.

"Don't get too caught up that this is a technology solution," Doggendorf said. "You're really digitizing what the business is already doing. So, you need to make sure that your business end users want this, and are bought into it."

3. Keeping non-profit employees connected with the cloud

When the San Diego Tourism Authority set out to explore its own digital transformation journey, it had a larger goal in mind. The non-profit, which markets tourism in San Diego, was trying to cut its IT budget by $200,000, while also improving communication and connectivity for remote workers, CIO Isabel Sauerbrey told ZDNet.

Tourism is the second largest industry in San Diego, and the city sees some 34.9 million visitors per year, Sauerbrey said. The tourism industry has been around for some time, so a big part of the organization's overarching tech goals were to retire older legacy systems and consolidate tools where they could.

In an effort to modernize, the organization started by moving its 10-year-old ERP system to the cloud. Specifically, it chose Oracle ERP Cloud, Sauerbrey said, which helped save money on hosting and support, while also requiring no capital outlay for upgrades. Upgrades, overall, were less painful, Sauerbrey said, as the system was easier to use, offered faster access to new features, and quick implementation.

For reporting, the San Diego Tourism Authority consolidated all of its systems into one reporting platform, Tableau.

"Tableau is a relatively low-cost solution when compared to other BI tools and also super-users can be trained to create reports instead of using development IT resources," Sauerbrey said.

Currently, the organization is working on implementing Microsoft 365, but this has proven "costly" compared to simply upgrading users to the latest Microsoft Office Suite, Sauerbrey said. However, the cloud storage and Sharepoint access have proven to be benefits.

The San Diego Tourism Authority's approach to digital transformation is unique in that it's framed within a specific goal around reducing the IT budget. This approach shows some of the investments that a company or organization can make to save money while improving processes at the same time.

"By making these efforts, it has enabled our IT team to focus on innovation, reduce development costs, and avoid spend time doing maintenance," Sauerbrey said.