Changing moods on IT investment - a gift to ERP leaders, or coal in the stocking?

John Appleby Profile picture for user john.appleby January 10, 2023
CEOs must be prepared to adjust their transformation pitch to the board, says John Appleby, CEO of Avantra. But can hyperautomation drive a better business case, or is it hyperbole?

The Befana sock with sweet coal and candy on wooden background. Italian Epiphany day tradition. © vetre - Shutterstock
( © vetre - Shutterstock)

In the last three years we’ve talked a lot about the acceleration of digital transformation projects. Whether related to supply chain or delivering an improved online or mobile customer experience, digital channels are recognized to be a necessity.

Just about every research study I read in spring and summer 2020 on CEO attitudes to transformation reinforced the notion that remaining competitive, or using the pandemic as a chance to put clear water between themselves and the competition, would set the timeline for investing in and delivering digital programmes.

Take for instance KPMG’s figures in 2020, which showed that creating next generation operating models had been brought forward by months, and in some cases years, for 74% of US businesses – 70% needed to do it for new revenue streams and 75% said a seamless digital customer experience was the driver.

Vendors under pressure to prove their worth

Fast forward to today and I would say the mood has changed. SWZD’s ‘State of IT’ for 2023 sums up the outlook - 50% of organizations plan to take precautionary measures to prepare for an economic slowdown in 2023. Infrastructure that’s not performing will be decommissioned, tech will be consolidated, and vendor contracts will be reviewed or renegotiated.

Bottom line, companies won’t be in the same hurry to deliver change. Don’t get me wrong, the appetite to spend is there – roughly half (51%) of organizations plan to increase IT budgets in 2023 and only 6% plan to cut back entirely – but the direction of travel is either being adjusted, or the pace of change is being rescinded.

The board will exert pressure to slow down roll outs and/or shift to an optimization phase.

A three-year programme for ERP upgrades may now take five years, and CEOs won’t find any discomfort in that decision because there is understandably an air of caution being applied to all spending. If the project won’t return cash, CFOs won’t want to know.

The collaboration imperative

I’d strongly encourage ERP leaders to work with their vendors and their business stakeholders to find ways to prove the ROI on the ‘humdrum’ of running ERP environments; will books be closed more quickly if models of observability are adopted? Will the time saving in automating manual tasks free up skill and create a new pool of talent that can be used to innovate new digital experiences for customers? Clarity on the output and outcomes will be imperative to secure funding.

Leaders should also expect to be asked if maintenance and upgrades will make a significant contribution to future proofing the business. As part of this, I anticipate more robust conversations about how the ERP technology roadmap will deliver efficiency gains, cost savings and innovation.

In fact, I fully expect every board to hold ERP professionals accountable to the roadmap. Each phase of roll out must deliver tangible benefit or it’s game over for the business case.

Be prepared if you want to win the argument

There’s an alarm bell that should sound here for ERP professionals; firstly, the board is going to be more involved, so that means there’s an urgent need to be more prepared for difficult conversations, and secondly, upgrades to ERP platforms will have to contribute to the bottom line.

Getting the green light on your typical multi-year projects will become harder. Upgrades simply won’t be considered a priority. Not if a major asset such as another locomotive or a production line robot can be bought instead.

I can see a double-edged sword emerging. Slowing down ERP upgrades is going to be the knee jerk reaction – the costs of doing business goes up in economies with high inflation, it makes sense to argue the case.

But some businesses could find that they get left behind as a result. The outlook is that they could still be paying for costly maintenance for much longer than ever planned, and consequently, a more onerous maintenance process. Better to take stock and look at a pathway to cloud and more SaaS opportunities that allow organizations to build more efficient processes and save money.

Hyperautomation is not hyperbole

With this context, I think it’s easy to see why Gartner extols the benefits of hyperautomation for businesses that want to deliver transformation and scale. Hyperautomation dictates that the more processes that can be streamlined, releasing resources back to the business, the better.

Cutting down backup and restore processes from seven days to a weekend might not sound earth shattering, but over the course of a whole year that’s a dramatic saving. Do it once, and you’ll want to do it again – soon you have a snowball effect. As all the savings from automating a multitude of processes are added up, then it’s possible to argue the case for automation, because it can and will make an exciting difference to cost management. Funds and resources can be diverted away from the ‘boring but essential tasks’ and used to deliver the next big thing.

I think every business will have to think like this in the year ahead, economic volatility or not. The simple truth is that competitive advantage won’t be converted into a dividend to shareholders unless there are clear gains in terms of agility, flexibility and innovation.

Layering the automation and therefore, striving to become a hyperautomation leader, should be at the heart of the plan. The brands that recognize this and review their investments accordingly are, I believe, the ones that will survive the turbulence.

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