COVID-19 crisis pushing organizations deeper into digital transformation

Technology budgets take hits, but tech leaders keep eye on remote work, collaborative needs.
Written by Joe McKendrick, Contributing Writer

There is speculation and anecdotal accounts that the COVID-19-related shutdowns or slowdowns in business and consumer activity and closures of physical workplaces have given many companies a kick in the pants they need to speed up their pace of digital transformation. All along, digital transformation has been mainly seen among businesses under competitive threats such as tech-savvy industry disruptors. COVID-19 may be the mega-event that pushes everyone toward digital transformation. 

Photo: Joe McKendrick

Overall, worldwide IT spending is now projected to decline by 2.7% in 2020 as a result of the pandemic, IDC estimates, As late as January, the consultancy predicted 5.1% growth in technology spending this year. The two areas still projected to see positive growth are infrastructure spending (expected to grow by 5.3%) and software investments (up by 1.7%). Demand for solutions supporting remote work and collaboration will drive this growth, IDC says.  

No data is available yet to gauge how much the COVID crisis is spurring digital transformation. But some early numbers from a recent survey of 137 IT managers from OpsRamp suggest digital transformation is suddenly top of mind as business priorities. In turn, this may be moderating any slippages in IT budgets. Seventy-three percent of IT managers (mainly in operations and DevOps) expect to either accelerate or maintain digital transformation initiatives through the COVID crisis.  "Digital products and services can help firms cope with an unprecedented slowdown, build a foundation of customer trust, and ensure customer loyalty when things get back to normal," the survey's authors state.  

The sudden push to accelerate digital transformation may also be driving targeted investment over the coming weeks and months, the OpsRamp survey, which was conducted in early April, shows. The majority, 58%, expect to either "significantly" or "moderately" increase their annual technology budgets right now, while 38% plan to either significantly or moderately reduce their technology spending. 

In terms of hiring, IT leaders are planning to hire more IT financial analysts (68%), cloud architects (53%), DevOps engineers (50%), and data scientists (47%).  Agile delivery and cloud cost optimization are the most important priorities for technology leaders today, underlining the twin needs for superior customer experiences and fiscal discipline. Close to two-thirds, 64%, are increasing their adoption of Agile IT and DevOps practices, while 62% are focusing on cloud cost optimization.

IT leaders are focusing on investing in keeping business operations running smoothly during massive remote work scenarios. The OpsRamp survey finds they are investing heavily in information security and compliance (62%) to help protect remote workers from sophisticated cyber attacks. Another 46% are targeting investments at data and analytics to deliver more enhanced customer insights and feedback. At least 45% continue to invest in public and multi-cloud infrastructure.

Performance monitoring is a top priority, the survey shows. This includes 69% investing in AIOps (69%) tools that can detect, diagnose, and resolve incidents at scale, along with cloud-native observability (51%) tools that maintain visibility into the health of distributed microservices applications, and network performance monitoring and diagnostics (51%) tools that help IT teams cope with traffic spikes and high levels of network utilization. In terms of cost reduction initiatives, IT teams are investing in self-service technologies (60%) to free staff from reactive work.

Importantly, financial accountability is key in setting today's IT spending priorities. "Technology chiefs will need to work with their finance counterparts to align IT spending with organizational priorities and ensure they have the right benchmarks in place to measure the business impact of IT investments," the OpsRamp survey authors advise. At the same time, they caution against taking an ax to IT budgets. "Freezing critical IT spending might put you out of business."

(Disclosure: I have performed project work for IDC,mentioned in this post, over the past year in my capacity as an independent researcher)

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