The response from organisations and technology leaders to the onset of the COVID-19 pandemic has been complex and varied. There has not been a one-size-fits-all model for ensuring businesses could continue to operate, given the rapidly changing landscape, the differing regulations in each geography and the challenges (and opportunities) national lockdowns presented to each sector.
We at diginomica have been documenting how businesses and technology teams have adapted, speaking to a wide range of companies about their experiences (all of which can be found in our dedicated COVID-19 resource hub here).
So it's with interest to note the release of the 22nd annual Harvey Nash-KPMG CIO survey today, which has some unique insight into the challenges and priorities for CIOs before and after the onset of COVID-19. Unique because the first iteration of the survey launched in late December 2019 before COVID-19 was an issue outside of mainland China.
After collecting 2,791 responses, the survey was paused in March 2020 and then launched again between May and August to include questions relating to the pandemic. As such, the results capture how the world has changed - or not changed, as the case may be in some cases - for CIOs.
For example, the survey highlights how technology spend surged during the initial months of COVID-19, but that budgets are likely to be suppressed going forward compared to last year. The report notes:
Our research shows that during this three-month period, technology spend grew at a greater rate than at any point in history. Technology leaders reported a median additional spend of 5 per cent to deal with the Covid-19 crisis. Data from Forrester shows that global IT spending reached US$3.5trillion in 2019, suggesting this spend uplift amounted to US$15bn spent per week in order to support the sudden move to remote working.
Given this unexpected surge in near-term investment, it is perhaps then not surprising that budget and headcount growth expectations for the next 12 months have dropped. Pre-Covid, 51 per cent of respondents expected budget increases and 55 per cent were planning on growing headcount. Now, budget increases are expected for 43 per cent and headcount increases for 45 per cent.
On balance, this still represents a net growth, and remains significantly higher than in 2009 after the financial crisis. This suggests that, from a technology perspective at least, the nature of this crisis is very different from previous ones.
As noted above, the opportunities and challenges presented by COVID-19 have varied greatly by sector - which too has been reflected in the responses from CIOs in the survey. Harvey Nash-KPMG note that in previous years largely all sectors ‘rose or fell' with the tide, but that sector now plays a significant role in how budgets will be affected in the future.
It adds that technology spend will be a function of how they respond to economic forces shaping their recovery - some may never recover, others will have to transform, and some will modify what they are already doing.
For example, leisure (26%), charity (32%) and manufacturing/automotive (38%) sectors are least optimistic about budget increases over the next 12 months. Whereas, power and utilities (52%), government (51%) and healthcare (49%) are the most optimistic. Retail (44%) and financial services (44%) are also pretty optimistic.
It's not hard to understand why this split between sectors is occurring when you consider the impact of COVID-19 on their respective businesses. The report states:
Power & Utilities is the most optimistic sector about future budget increases, presumably because the demand for its services remains little changed. At the other end of the scale is the Leisure sector, including tourism, which has been significantly adversely affected. Every sector is following its own path.
The survey also broke down the expectations from CIOs about how long it will likely be before they have an accurate view of the future. 30% stated that they already have an accurate view, whilst 28% said they will not be able to accurately forecast for another 4-6 months. 23% anticipate that being 7-12 months away, whilst 6% expect it to be even longer (13-24 months).
The report adds:
Almost six in ten (59 per cent) of respondents feel that they will be unable to accurately forecast for long term planning decisions for at least three months and almost one in ten think it will take a year or more. Business hates uncertainty, and yet that is all that can be guaranteed right now. Technology leaders tell us that instead of long-term plans, organisations are focusing on ‘getting their house in order' by optimising their estate, reducing technology debts and putting building blocks in place for their future."
Harvey Nash-KPMG also asked CIOs how they anticipate responding to the crisis, with regard to four approaches:
Hard reset mode - recovery will take a long time after long-term economic damage
Transform to re-emerge mode - business models have changed along with how their customers interact with them
Modified business-as-usual mode - organisations that will suffer during the consumer slowdown but recover quickly
Surge mode - organisations that can scale rapidly because consumer behaviour changed permanently
You can see from the chart below how each sector sees their business technology strategy changing as a result of COVID-19:
The report adds:
Organisations throughout each sector find themselves in different recovery modes when it comes to executing their business technology strategy. More than two-thirds of organisations are expecting a significant transformation or modification to their current business model. Twenty-nine per cent report that there has been a surge within their business and require scale and new ways of working to capitalise on the gains they have made, particularly in the Technology, Power & Utilities and Healthcare sectors.
A smaller portion of organisations are experiencing a hard reset, in sectors like Telecommunications and Manufacturing / Automotive. It is important to note that most organisations will not fit into only one recovery pattern, with most experiencing multiple different patterns depending upon their mix of products and services.
Finally, the survey also, interestingly, captured the top three priorities for CIOs pre- and post-COVID-19. The top two did not change as a result of the pandemic - with improving operational efficiency taking the top spot, followed by improving customer engagement. However, pre-COVID-19 the third most important priority was developing new products and services, which has now been replaced by ‘enabling the workforce'. This has jumped up from eighth place since the pre-COVID survey.
The report adds some colour to the findings and states:
Technology teams have played a key role in getting their organisations working remotely and providing the tools to keep employees across a multitude of different roles and professions engaged and productive.
Operational efficiency and customer engagement keep their top positions, but when speaking with technology leaders our sense is that the purpose of these has changed in the light of Covid-19. Customer engagement seems to be more focused on developing new channels to market, understanding consumer behaviour, and enabling customers to engage in a literal sense when not in person, as well as creating more and better relationships and digital experiences. Operational efficiency may also be defined in a whole new light as organisations seek to offset disruption or resource constraints with automation and lean governance models.
In terms of the most important technology investments, security and privacy came out on top (47%), followed by customer experience and engagement (44%), infrastructure/cloud (35%), and automation (29%). At the bottom of the investment priorities sits finance and accounting (8%), systems of record (9%), supply chain and logistics (9%), employee engagement and HR (10%), and marketing and sales (14%).
Perhaps not loads of surprises in the results of the survey, but it is useful to get some data on how CIOs are thinking about their technology estate and their teams compared to a few months ago. I think it's clear that uncertainty is still a big factor and that workforce enablement is key. As the report notes, companies that had been investing in modern technology and tooling will likely continue to do so, but those that had been putting it off are going to be facing a much tougher challenge in the coming months.