Australian businesses seek value as global headwinds approach
A range of macroeconomic trends, such as issues around trade relations, growth, margin control, and productivity, are expected to underpin IT investment priorities for businesses in the coming year, according to Gartner research director Chris Ganly.
Due to these pressures, Ganly said businesses are more cautious than ever about how their tech budgets are allocated.
"There is a heightened awareness that there are some headwinds coming and there's a year of challenged growth ahead. With those pressures coming, there needs to be an increased assessment of why we're doing something and what is the outcome of what we're doing," he said.
"Increasingly, organisations are starting to think more about what the value an investment can deliver, rather than just making investments for investments sake."
New Relic APAC group vice president Greg Taylor agreed that executives are taking more considered approaches when it comes to understanding what value can be achieved from their technology investments.
SEE: Tech budgets 2020: A CXO's guide (ZDNet/TechRepublic special feature) | Download the free PDF version (TechRepublic)
"Executives, especially technology leaders, are asking, 'what is the business value?' We're investing all this money into maybe digital transformation or the cloud, and I need to have a conversation about what is the business value for those investments," he said.
"There's a lot more purpose in what we're doing and how are we measuring success, versus just investing."
He went on to explain that what has changed for many organisations these days is that the end goal behind technology investments are to enhance the customer experience. Technology spend serves to hit all aspects of the business -- it is no longer just an IT responsibility.
"When you're talking about budgets, CIOs are accessing budgets from the business. When you look at IT budgets, they are across the board. While the idea of 'do more with less' is still there, when you talk about anything touching the customer, the budget becomes a lot more robust," he said.
The ongoing priorities for many businesses will be to enhance efficiency and effectiveness, improve investment on returns, and ultimately drive growth. Invariably, those same businesses will turn to technology to help with that agenda, said Guy Holland, KPMG Australia's national lead partner for digital consulting.
Taking control of tech investments from the top
The task of driving the decisions behind budget allocations is increasingly being performed by other members of the executive team, rather than just the CIOs as fewer of them sit on the board. The rate of CIOs on boards dropped from 55% to 49% over the past two years, according to the 2019 Harvey Nash/KPMG CIO survey.
Holland described this trend as "disappointing", especially as businesses continue to spend more money on technology. He believes this change has been driven by the federation of technology spend that has become more business led, rather than being driven by the CIO.
"I think if I was a CEO of an organisation I'd still want the CIO on the executive team. I want to hear first-hand what's going on because even though business leaders are taking an increasing responsibility for technology spending, the responsibility for supporting that technology still largely rests with the core IT function," he said.
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Unlike Holland, Ganly sees this trend as a positive one, as it signals that executives across the board are equipping themselves with the knowledge needed to make informed IT decisions, which is now much easier to do as technology is encompassed within almost every facet of everyday life.
"For the majority of organisations, the responsibility for IT falls with the CIO, but increasingly the board, investors, and executives in the organisation need to be -- and should be -- interested in decisions being made across the organisation," he said
Regardless of who is calling the shots, there are four key areas where businesses are predicted to spend their tech dollars in 2020.
1. Automation
Businesses across different industries have long invested in automation technology. The difference with the next wave of automation technology though, according to Holland, is that it will help move the current workforce away from mundane and repetitive roles, into ones that are rewarding and value-adding.
The Harvey Nash/KPMG CIO survey showed that the introduction of automation to improve efficiencies was up 6% in 2019 as a board priority, with those participating in the survey expecting that up to one in five jobs will be replaced by automation within five years.
"If you look back through history, we've always tried to automate," Holland said.
"If you think about the very old farming techniques that were very manual such as ploughing fields by hand, they were eventually replaced by horses, and then we brought machines into farming … eventually we will take human beings out of the equation altogether.
"But other roles have come along to give the workforce more enriching things to do, and I'm very optimistic we will continue to see the same thing here."
Similarly, New Relic general manager of product management Ken Gavranovic said automation is training the workforce to increase their skills for high-value work, while removing the need to carry out low-value tasks.
2. Cybersecurity
While cyberattacks are not slowing down -- with the latest data from the Office of the Australian Information Commissioner indicating that of the 215 notifiable data breach notifications during January 1 and March 31, 61% were malicious or criminal attacks -- business confidence in dealing with threats is growing.
Although, how businesses decide to allocate funds to tackle cybercrime may potentially change.
"When it comes to cybercrime a lot of people still think of it as nefarious characters looking to steal money from individuals or organisations," Holland said.
"I think what we haven't seen yet is cybercrime as it pertains to economic disruption where potentially state-based actors are using cybercrime to take systems out and disable parts of cities. We haven't seen a lot of that yet, but the capabilities do exist, so maybe that confidence level may change a bit."
3. Data
The plethora of data created from Internet of Things devices has driven businesses to think about the value that can be extracted, and this is increasingly being reflected in the IT investment decisions made by businesses.
"Data is where we'll seen an explosion of investment," Holland said.
"Organisations are still coming to terms with the value of data that they are actually holding and how they can combine that data with data from third-party sources to develop product and services."
See also: Budget breakdown: How IT budgets changed over the last 5 years (TechRepublic)
Holland however, warned that it is equally important for businesses to invest in technology that allows them to handle data in a secure and private way, while delivering richer customer experiences, to avoid scenarios of mistrust as experienced by social media companies such as Facebook and Instagram.
"There is an explosion of connected devices and I wonder if the level of rigour around that is where investments need to be at this point in time, as it could potentially give more pointed access to anybody who has a mind to do bad things. As we see more connectivity through the explosion of devices, we'll have to start operating with greater caution," he said.
Ultimately, when businesses can achieve both, Holland believes it will help drive greater efficiencies within companies.
"Being able to develop insights from the data that is increasingly forward looking and predictive, as oppose to backward looking and historical, will allow businesses to make decisions much quicker than humans can to offer better services or products – or even save lives," he said.
4. Redefining infrastructures
While tech dollars are expected to be invested in technologies that drive future growth, there are still plenty of businesses that continue to put money towards their digital transformation journeys.
Holland acknowledged that while organisations have shifted away from legacy systems, replacing them with cloud-based technologies for greater flexibility, businesses are now at a stage where they are trying to work out how to deliver on the digital promises they make to customers.
"What organisations are doing to deliver on that digital promise is look at their front, middle and back office are fully interconnected and operating to the same heart beat and that's a big investment area to make that a reality," he said.
Taylor said tech budgets have become more robust as businesses realise the direct impact that digital transformations can have on customer experience.
"We're not talking about a budget anymore, we're talking about business value of 'show me the output, show me what's happening'," he said.
He highlighted this trend as being particularly prominent in the Australian market, in comparison to the rest of the Asia-Pacific and Japan region, demonstrated by the way local companies adopt new technologies.
"Australia sometimes will leapfrog certain technologies. For example, the pager never existed but in the US they were very popular. But text messaging existed," Taylor said.
"Australia has also jumped quickly on agile and have really subscribed to it. NAB, ANZ, Telstra, CBA, are using agile development…What's exciting about this is that it becomes less of an IT budget and becomes more of how do we shift the spend to make technology the enabler to get us better customer outcomes."