Is the IT budget ready to power digital transformation? The journeys of four CIOs

Customer demand and competitive pressure are driving companies to digitize operations. Here's how four CIOs from different industries are budgeting for the shift in 2017.
Written by Alison DeNisco Rayome, Managing Editor
Image: Getty Images/iStockphoto

The digital transformation is upon us, with many CIOs expected to lead the charge. These technology leaders must determine how much of next year's budget will drive internal and external innovation to meet staff and customer needs -- and we've found a wide variety in investment levels across different industries.

While 72 percent of CXOs report that it is 'critical' or 'very important' for an organization to turn to a digital business model, only 15 percent said their company is agile enough to build such a system, according to an August survey from Unisys and IDG Research.

Another recent study found that 52 percent of companies surveyed looked to their CIO and CTO to lead their organization's digital transformation, but only half said they actually had a business-wide digital transformation strategy.

Evolving customer preferences, opportunities for growth in new markets, and competitive pressure are the top drivers of digital innovation for companies, according to a September report from Altimeter.

"The CEOs of the world have been asked to become more technical, and look at the world from a digital aspect," said Neil Jarvis, CIO of Fujitsu America. "Because of this, we'll start to see more CIOs move into different CXO positions, and ultimately CEO positions. If you don't know technology or the way analytics work as a CEO, you're probably going to suffer."

Some 61 percent of technology decision makers said their company's IT budget will be increasing in 2017, according to a new Tech Pro Research survey. Increasing productivity with technology was one of the top IT priorities going into the new year, the survey found.

TechRepublic spoke with four CIOs about their 2017 budget goals and how much of it will go into their company's digital transformation.

Moving to the cloud

Neil Jarvis, CIO of Fujitsu America

Percent of budget for digital transformation: 40%

Information technology equipment and services company Fujitsu employs 160,000 workers worldwide, with four CIOs covering different geographic areas. In June, the company began the global rollout of its Infrastructure-as-a-Service (IaaS) and Platform-as-a-Service (PaaS) cloud platform, Fujitsu Enterprise Cloud Service K5. Next year, 40 percent of Fujitsu America's technology budget will go toward new digital initiatives such as this, Jarvis said.

"Our corporate strategy is to roll out a client-centric digital strategy," Jarvis said. "All of the things I'm doing internally are the same issues we hear our clients discussing. We're trying to show our clients that we are ahead of them on that journey."

Internally, Jarvis is now delivering Office 365 on a new network that will ride on top of the K5 cloud environment. "We're moving away from the desktop form, putting all of our internal apps in the cloud, and moving secure information there as well," Jarvis said.

The availability of data is propelling Fujitsu's digital transformation, Jarvis said. "If we want to look at data that's relevant to a client, an industry, financials, or a geopolitical issue, we can do that," Jarvis said. "There's a need for our ability to look at that data quickly, efficiently, and in different ways at the drop of a hat."

About 25 percent of Jarvis's budget will go to keeping existing operations running. Much of the rest will likely go to salaries, he said. "In the past we've spent more on existing systems than digital innovation," Jarvis said. "But we as transformational CIOs are looking to partner with businesses on digital efforts. Traditional CIOs just want to keep systems running."

Building apps

Francois Tricot, CIO of Ceva

Percent of budget for digital transformation: 80%

Veterinary pharmaceutical company Ceva employs 4,000 people based in 42 countries. CIO Francois Tricot said his goal is to deliver corporate IT in a way that's indistinguishable from consumer IT, and that "digital transformation was key in meeting that goal."

Tricot built an internal "Quick Apps Team" to create apps using QuickBase, which does not require code. "It allows our team to deliver apps customized to staff's needs within days or weeks -- much faster than the solutions we were using prior," Tricot said. "I think that's one of the ultimate goals of digital transformation -- getting solutions out more efficiently."

The team developed an app store for employees that allows them to easily access the software they need to manage and complete projects in sales, marketing, supply chain, human resources, quality control, research and development, administration, and regulatory compliance. In the six years that the team has used QuickBase, Ceva saw a 30 percent drop in IT spending, and higher user satisfaction rates. The Quick Apps team has developed more than 300 apps used by over 2,000 employees.

Ceva's IT team recently launched a project called Quantum, sponsored by the CFO, to push for more digital services. "I would not be surprised to find that 80 percent of our IT budget next year will be linked to digital transformation," Tricot said. This includes work on business intelligence, performance management, CRM, marketing websites, supply chain performance, and talent management. Cloud computing has largely driven the company's transformation, Tricot said.

Breaking down silos

Charles Eckstrom, interim CIO of Orange County, CA

Percent of budget for digital transformation: Currently unknown, but an increase over years past

Orange County California's local government manages $6.1 billion dollars and services 3.1 million residents. Up until last year, all 24 government departments had their own IT staffs, and built applications in silos with lots of overlap. Interim CIO Charles Eckstrom began building a shared services team this year, and currently supports five of those department's tech needs.

Orange County is building its own internal Azure cloud platform -- a rarity for local governments, Eckstrom said. "We will start to see savings on the infrastructure side," he said. "Not only will we not be buying physical or VM server equipment, but we'll see how many apps we can get running in the cloud as well."

As of mid-September, the team had one app in the cloud, with plans to move a large enterprise procurement app up by the end of the month. The team owns more than 100 apps total, and plans to build more enterprise-wide ones.

Shifting to the cloud to host servers will ultimately offer a tenfold decrease in cost, Eckstrom said. It will also decrease the county's data center square footage.

Other digital focus areas for 2017 include data analytics, business intelligence, and a CRM solution for county residents -- all of which are uncommon in local governments, Eckstrom said. In terms of CRM, his team envisions building a portal in which residents can see dashboards of all of their interactions with different county agencies, from the status of building permits to library books.

"This is what our constituents are demanding," Eckstrom said. "People don't want to call a centralized number, they want to get on their tablet or smartphone and interact with the ease of self-service."

It's still early to indicate exactly how much of the 2017 budget will go toward these digital initiatives, but it's definitely an increase over years past, Eckstrom said. The team does not plan to spend less on existing operations, but rather refocus that money on more enterprise-wide projects.

Enhancing data storage

Peyton McNully, CIO of the HudsonAlpha Institute for Biotechnology

Percent of budget for digital transformation: 20%-30%

The HudsonAlpha Institute for Biotechnology in Huntsville, Alabama is a nonprofit genetics and genomics research institute with 800 employees. It specializes in whole genome sequencing, which produces about 4.5 petabytes of new data each year -- but the nonprofit has limited funds to invest in storage, according to CIO Peyton McNully.

"A majority of the science associated with genomics is very slanted toward new software and computational workloads," McNully said. "Speeding that up is now more of a DevOps-type architecture of speed, agility, and nimbleness, which we're trying to achieve on the research side."

Between 20 percent and 30 percent of the 2017 IT budget will go towards digital transformation initiatives, McNully said. It will likely start with proof of concepts, and then planning what to scale out in coming years.

The nonprofit has also begun using tools such as Terraform to build operating systems from templates. This makes it less necessary to back up every machine running on an enterprise stack. If it's templative, you can rebuild it, saving terabytes of storage and thousands of dollars on the back end, McNully said.

On the enterprise side, the goal is to get as close to the end user as possible, giving them the abilities to perform basic IT functions like resetting passwords, McNully said.

"What we're trying to do with selected projects on a quarterly basis is make small tweaks and changes we can roll out to deliver more value to the business line faster," McNully said. "We think 20 percent to 30 percent will allow us to do that, especially since bandwidth and storage are cheaper and denser than ever."

Too often, companies think digital transformation means completely throwing out existing systems, McNully said, while it could be something as simple as creating a website for people who forget their badge.

"Find a way to set very small attainable goals you can build off of and show immediate near-term value, with as little invasiveness as possible into your team's existing schedule," McNully said. "As the company sees that value is materializing, it becomes easier to begin to ask for more and plan for more."

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