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Why a ‘cash crunch’ means digital transformation spend must get selective

  • The pandemic highlighted just how reliant we are on technology and why digital transformation is so important 
  • As businesses take stock of the situation, priorities have shifted from business growth to survival 
  • But with budgets shored up in an uncertain market, technology investments are being limited to certain ‘staples’ 

Cloud-first businesses were some of those least rocked by the pandemic. For the rest, the urgency to engage and advance digital transformation strategies has been kicked up a notch.

Even at the most basic level, cloud-based tools such as Zoom and Teams have kept workforces in touch and productive from their respective homes. Elsewhere, AI-powered chatbots have bolstered overburdened customer service divisions, automation technologies have allowed smaller teams to reallocate limited resources, and advanced cybersecurity solutions are ensuring distributed workforces are protected. 

Technology has played a leading role in enabling businesses to continue to operate. As the significance of that has been placed center-stage, there’s now little doubt among businesses that investing in digital is the only way to both survive the fallout, and remain competitive going forward. 

But as the world of business enters into a period of economic uncertainty and faces a “cash crunch”, many companies are unconfident they have the funds secured to back investments in new technology. 

That’s according to a new report by HFS Research and KPMG dubbed The Enterprise Reboot. Claiming to reflect the perspectives of 900 enterprise tech leaders, the report explores the shifting priorities of digital transformation, and the dichotomy of how, while there’s never been a greater impetus to ‘go digital’, many businesses simply lack the funds to do so. 

Nearly 60% of respondents agree that COVID-19 has created a drive to accelerate digital transformation, but just 13% expect to increase investment in emerging tech as a result. 

Business objectives are, for now, focused on survival, and that means ensuring work from home arrangements are functioning as a more viable permanent solution, automation tools are in place, and opportunities are taken to crowdsource talent from a wider pool of remote candidates.

On the other hand, objectives like growth, acquisitions to entering new markets, making cultural changes, and reskilling and training have taken more of a backseat. 

The bare DX essentials

Since the full force of the pandemic was realized, the perception of importance in investments into emerging technologies — including AI, hybrid and multi-cloud, smart analytics and process automation — has shifted away from cost reduction, improved decision-making ability, and improved brand value. 

Instead, investments here are considered “essential for future survival” across the board. 

With much more at stake from their limited budgets, businesses must focus on mature “have-to-have” technologies, said HFS, such as cloud, automation, and analytics, that may drive quicker ROI. On the other hand, more nascent technologies like edge computing, blockchain, AI, and 5G have seen budgets pulled back by more than 50% in most cases. 

Hybrid and multi-cloud investments are regarded as perhaps the most important post-COVID investments, but the value of automation is also seeing an uptick in technologies like Business Process Management software, Robotic Process Automation (RPA) and Low Code or No Code development platforms. 

Work from home arrangements — and the increased vulnerabilities of multiple endpoints and BYOD usage — has meanwhile led cybersecurity to become a “c-level mandate”. 

With the exception of process automation, which more than a third of companies claim to have seen immediate value from, the added pressure to invest in the technology “essentials” comes with the fact the majority believe they won’t see significant value for at least 1-2 years. Ensuring this technology is onboarded as soon as possible, then, is crucial. 

Even among the “have-to-have” technologies, however, there are challenges in realizing value in investments towards digital transformation. Post-COVID, leaders report that making the business case for investments and securing buy-in from the C-Suite have become some of the hardest tasks. 

Ahead of the pandemic, businesses considered overcoming the organizational cultural changes the biggest potential roadblock, but this has become much less of a concern today.

If there’s a silver lining to all the talk of tight purse strings, it’s that the majority IT buyers expect to be ramping up their spending once again within the next year.