How to continue tech investment despite a squeeze on funds

IT leaders may be under exceptional pressure but there are several ways to enable tech investments to continue even when budgets are tightened…

While many areas of business have been put on hold due to the COVID-19 pandemic, digital transformation shouldn't be one of them.

Gartner's Efficient Growth research found that companies that chose to simply weather changes in economic cycles were worse off than those that developed comprehensive action plans to navigate the 2008-9 recession. "The latter group were rewarded with sustained advantage over their competitors," says Brian Morgan, director - CFO advisory at accounting software firm Rimilia.  

"With these learnings in mind, those that continue their digital transformation journeys, build for the future and plan for recovery during the crisis will see a greater focus on raising profitability and attracting and retaining customers in the long-term."

May 2020 research from the London School of Economics showed that 15% of organisations were well advanced with and continuing digital transformation, and that "they will probably gain an irreversible advantage when any economic recovery arrives," says Leslie Willcocks, a professor from London School of Economics and Political Science, Department of Management.

Another 20% have slowed down their digital transformation due to the pandemic, but the worrying group, says Willcocks, are the 65% who are not investing in digital projects, or only in business continuity. "This may be out of hardship, and understandable, but building resilience and staying on course with digital transformation still needs to be actively sought, or survival will be less than worthwhile."

 

Current challenges for IT leaders

For some it's taken a global pandemic to realise that digital strategies hold the key to business resilience in times of crisis, and many want to make tech investments a priority.

However, IT management has many challenges when it comes to continuing with digital transformation during this time of uncertainty. These include reduction in budgets, risk aversion and capacity strains regarding skills and infrastructure.

Budgets will shrink, forcing CIOs and IT leaders to do more with less, and they'll need to build very strong business cases to get buy-in from the board room, showing a clear ROI relating to the current situation.

This is necessary, as in times of crisis companies can turn risk averse. "This hinders innovation and resilience, and can even doom companies to become irrelevant," notes Daniel Sanchez Reina, research director of Gartner's CIO leadership research group.

"IT management should show the board that these investments will determine the future of the business," advises Bob Bailkoski, CEO of infrastructure and service provider Logicalis. "Often costs associated with transformation make people step back and pause, but management can work to zone in on the business' priorities."

Then there's the challenge of capacity, as many resources are currently depleted as a result of the pandemic. "Access to expert staff for business analysis and design is somewhat restricted as they're either furloughed or at maximum capacity," points out Alistair Laycock, custom solutions director at software developer Haulmont.

 

Flexible financing options

For those facing a squeeze on funds, there are a number of options that can help digital transformation to continue.

Morten Illum, VP of Aruba EMEA, says there are two main avenues businesses can explore when it comes to flexible financing; deferring or reducing expenses, and generating cash from assets.

"Vendors may let you delay payments for a set period of time, typically a number of months, or start your payments on a reduced rate and offset the balance at an agreed date in the future," he notes. "They may also offer to buy back your existing IT assets or other infrastructure, and lease it to you as a service."

Willcocks points out that IT suppliers can be just as desperate for business as their customers, and he's seen options including delayed payment, shorter term contracts, only-pay-for-use and joint development with favourable conditions on skills provision.

"Suppliers are offering very good deals at the moment, so people should be bold when negotiating pricing, financial terms and other conditions," says Mike Fenna, chief technology officer at distance learning provider Avado. "Don't hesitate to get creative - many suppliers are happy to discuss options such as profit or revenue share, where the bulk, or sometimes all, of the payment only happens when the benefits are delivered."

Lee Ayling, head of UK and Ireland advisory at tech firm Avanade, believes we're likely to see more partnerships formed, both in-market and with suppliers.

"Companies will be looking for ways to co-invest in services - both to optimise use and to create new revenue streams together. We've seen a macro shift towards platform businesses and it's likely a lot of suppliers will be wanting to invest with their customers in order to create new industry or process-specific platforms."

Finally, Morgan advises that companies don't overlook debtors - often the largest asset on the balance sheet. "This represents a hidden source of capital, which if focused on, reduces the need to look externally for additional financing," he points out.

 

Which option is best for your business?

Deciding which is the best option for your business will largely depend on your current infrastructure and preferred future consumption model, says Illum. "What is the scope of your existing tech infrastructure? Do you want to continue to own it or are you happy to pay to use it instead? Are you comfortable outsourcing its management or would you like to keep it in-house?"

Research is certainly advised, but speaking to companies will give businesses a better, and more human, understanding of what's on offer advises Rob Harrison, managing director of SAP Concur UK and Ireland. "Digging through mountains of information can be overwhelming and too much choice can mean stasis and confusion. I strongly advise picking up the phone and talking with an expert directly about the most suitable options."

 

A wake-up call

The pandemic has shown businesses the consequences of years of inaction and slow digital transformation, says Nick Ford, chief technology evangelist at software firm Mendix. "With thousands of employees forced to work from home overnight, those without the infrastructure and tools already in place scrambled to develop workarounds and embrace a digital mindset."

However, it's important that businesses don't fall into a trap of thinking digital transformation is less important as the lockdown eases. The need to transform was here before the lockdown and will continue long afterwards.