Recession Advice: Go on the Offense With IT Investments

Now is the time to take an offensive digital strategy. Here’s Why and How

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Recession Playbook for IT Executives & their Teams

Access powerful tools, actionable insights and client success stories in key areas of digital strategy.

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Make the right digital bets at the right cost

Amid economic headwinds and the threat of recession, deploy the right digital strategy and technologies to:

  • Permanently reduce the cost of doing business.
  • Improve customer and employee experience.
  • Exploit disruptive innovations.
  • Outperform competitors during a downturn.

Read on to learn more about six key elements of your digital offense and how Gartner can help. 

Act in Six Areas to Jump-Start Your IT and Digital Strategy

Opportunity exists to navigate and come out ahead of today’s economic headwinds. Here's how and why to invest in digital initiatives and technologies.

Leveraging digital against recession pressure

Today’s economic headwinds are stacking up, but organizations have a lot more digital tools and digital capabilities at their disposal than they did during the financial crisis of 2008-2009. Deploying digital enables organizations to reduce the cost of doing business and deliver against current and future customer and employee needs.

It’s also an opportunity to experiment with disruptive innovations and technologies and redefine the next decade of business. The CIO-CFO relationship is critical in ensuring these innovations get appropriate funding and the appropriate risk appetite is set.

Define digital strategy, ambitions and outcomes clearly

  • 80% of CEOs plan to invest in new or substantially improved products, and 62% of corporate boards say improved customer loyalty is the top expected outcome from becoming more digital.

  • 85% of CEOs intend to increase investment in digital capabilities.

  • 94% of CEOs want to maintain or accelerate the already intense pace of digital transformation sparked by the pandemic.

Channeling that interest into action requires proactive strategy. Highly effective digital leaders rigorously define and articulate the scope of digital ambitions, declaring how far their enterprise intends to leverage digital technologies and approaches to improve tangible business outcomes. 

Distinguish in digital strategy between:

  • Digital optimization, which improves the current business model or public mission. Examples include using digital technologies to improve customer experience and productivity while maintaining the same business model.

  • Digital transformation, which pushes the enterprise beyond the current business model or public mission, as a whole or in specific business units. Examples include new digital products/services, platform and subscription-based business models.

Prepare to build your IT digital maturity

Whatever the strategic ambitions and associated strategic plans, make sure digital initiatives are selected carefully so the enterprise does not spread its focus and resources too thinly. To achieve enterprise ambitions, CIOs must invest in four core mutually reinforcing capabilities.

Use diagnostic assessments to determine the maturity level of your IT function in all four capabilities — and align your target maturity level and transformation program based on the enterprise’s digital ambition.

Data sources: 2022 Gartner CEO and Senior Business Executive Survey; 2022 Gartner View From the Board of Directors Survey; 2022 CFO Recession Planning Poll

Identify and accelerate differentiating digital bets

  • 70% of CFOs expect digital technology to get more funding.

  • 31% of “grow revenue” digital initiatives are behind schedule on delivering expected value.

  • Gartner predicts that by 2025, productivity will be a top five CEO strategic business priority.

Digital opportunities are plentiful right now, and internal funding is still available as business executives see digital as key to dampening the effects of inflation and integral to growth strategies. But your board doesn’t want to hear in a year or two, “We continued to spend aggressively on digital, but we did not capture the value like competitors.”

In general, certain digital investments are likely to be especially important:

  • Digital products and services designed to better meet customer and employee needs. You don’t want to have to tell your board, “Competitors out-innovated us with digital products and services,” so it’s also critical to develop a future vision of those needs. 

  • Productivity and efficiencies to make the organization faster and leaner. Industries suffering from supply-side shocks and those more susceptible to inflation spikes will especially benefit by developing and deploying digital business capabilities and investing ahead of revenue expectations in areas such as data and analytics, cloud computing, security and other predictive and autonomous capabilities.

But placing the right digital bets for your organization ultimately means delivering business value. 

Prioritize based on business value

Gartner predicts that by 2027, 75% of all IT investments will fail to drive meaningful business value if CIOs do not establish a clear and actionable technology investment model. 

Make sure you foster a productive CFO-CIO partnership that focuses on enterprisewide outcomes when you try to seek and sustain funding for digital initiatives.  

Data sources: 2022 Gartner Overcoming the Barriers to Digital Execution Survey; 2023 Gartner CIO and Technology Executive Survey; 2022 CFO Recession Planning Poll; 2022 Gartner Funding Digital Initiatives Survey

Rethink the employee value proposition in IT

  • 79% of executives report the availability/cost of technology talent is the most common hindrance to digital execution. 

  • 70% of CEOs intend to increase investment in people and culture development.

  • 47% of CFOs report it’s difficult to find and hire digital talent.

While reports are growing of layoffs in the tech sector, digital talent remains both scarce and costly, especially for certain digital skill sets. There may be opportunities to snap up digital natives from companies that have retrenched (often startups), and you don’t want to have to tell your board “Other companies secured great digital talent at a discount, but we did not”.

But longer-term, what’s needed is a sustainable talent acquisition and development pipeline, set up to ensure the right talent is in the right place at the right time. And what has remained true since the pandemic forced an overnight change in work models is that the employee value proposition (EVP) must evolve to attract and retain digital talent.

Aggressively diagnose and solve digital talent challenges

Long-term, you also need to diagnose your enterprise’s particular talent challenges to develop a strategy and tactics tailored to address them. Key elements of future-proofing the IT workforce in this way are:

  1. Identify and prioritize digital skills and talent needs.

  2. Devise strategies for talent:

    • Recruitment — to ensure you attract and hire the right high-potential talent profiles.

    • Renewal — to ensure continuous renewal of workforce capabilities that support the changing needs of digital business.

    • Retention — to deliver on key drivers of employee engagement and develop a total rewards strategy to motivate and retain employees for the long term.

    • Release — to effectively offboard as well as onboard, since former employees may rejoin the company in the future or become valuable customers, partners and brand advocates. 

Data sources: 2022 Gartner Overcoming the Barriers to Digital Execution Survey; 2022 Gartner CEO and Senior Business Executive Survey; 2022 CFOs’ 2022 Playbook for Enhancing Profitability and Driving Digital Acceleration

Avoid common cost management errors

  • Global IT spending is expected to total $4.5 trillion in 2022, up 3% YoY.

  • 40% of CFOs expect to cut costs in 4Q22 if inflation stays high.

  • 94% of CIOs believe they understand how technology impacts corporate financials, but only 62% of CFOs agree.

Worldwide IT spending is still rising and 70% of CFOs expect digital technology to continue to get more funding. But CFOs expect to reduce costs if inflation persists and are telling business leaders to find efficiencies and savings — and to prepare to live in an environment of trade-offs.

Economic headwinds inevitably force organizations to focus on cost reductions. The key is to avoid common cost management errors that limit the organization’s financial health and growth. 

Three things your board won’t want to hear when looking back at today’s cost decisions:

  • “Our costs kept increasing with inflation and now our margins are uninvestable.”

  • “We cut costs too far and couldn't keep up with demand when it returned.”

  • “Higher product pricing led to permanently losing market share.”

Fund digital via strategic cost optimization

Done right,  strategic cost optimization uses a programmatic, shared approach to evaluate spend and costs, enabling you to optimize current resources and shift savings to investments that deliver greater value to the business.

To ensure that digital doesn’t go underfunded due to cost pressures, make sure you aren’t forced to simply self-fund digital initiatives through cost savings from other budget areas.  Realizing scale from digital efforts requires more substantial funding than that generated by IT budget savings, and digital is not a zero-sum game. 

Articulate both costs and benefits in terms of business value and foster a productive relationship with the CFO to secure access to digital-investment funding (also see “Prioritize digital bets”). 

Data sources: 2022 Gartner Forecast Analysis: IT Spending, Worldwide (June 2022); 2022 Gartner Funding Digital Initiatives Survey; 2022 Gartner CEO and Senior Business Executive Survey

Proactively manage vendors and future IT contracts

  • Gartner recommends negotiating future price increases below regional inflation rates.

  • Many vendors operate with margins of 50% or more; make sure to know the root cause of requested price increases. 

  • Worldwide public cloud end-user spending is expected to reach nearly $500 billion in 2022.

Vendor negotiations are challenging even in the most favorable economic conditions, but inflation and economic uncertainty add new complexity. You need to be especially vigilant in managing IT vendors to decipher whether seemingly exorbitant price hikes and excessive renewal costs are fair and in line with economic indicators.

While managing IT costs is an ongoing imperative, certain technologies are especially integral to offensive digital strategy today. For example, public cloud is growing as the primary architecture for modern workloads, and public cloud end-user spending is surging. But, cost mistakes often accompany cloud migration and ongoing cloud costs can spiral. Planning a cloud strategy must include decisions about services and providers from the outset. 

Clients often tell Gartner they struggle with conflicting messages from vendors, which make it difficult to accurately predict tangible cost savings from the chosen strategy. For example, traditional cloud vendors may continue to push on-premises infrastructure — and have modernized their pricing to offer pay-per-use models — while cloud providers may make exaggerated cost savings claims about migration. 

Analyze vendor proposals thoroughly

While the inflationary environment may make vendor negotiations thornier, technology proposals must always include enough detail to enable CIOs and their teams to unbundle terms and surface hidden and missing costs. Make sure to use tools and financial models to evaluate new and renewal acquisitions and negotiate complex deals effectively.

For example, Gartner recommends a four-step approach to analyze and negotiate multiyear software and SaaS deals. At a glance those steps are:

  1. Engage stakeholders to forecast usage and implementation.

  2. Request vendor pay-as-you-go (PAYG) proposals to compare multiyear prepay options.

  3. Calculate the net present value (NPV) of PAYG payment streams to compare prepay options.

  4. Use NPV-to-prepay analysis models for leverage to negotiate better pricing and terms.

What is a technology roadmap? Do you need one?

A technology roadmap is a strategic blueprint that communicates how an enterprise’s IT plans will help the organization achieve its business objectives. It often contains visual graphics and supporting documentation that serve as helpful tools to show progression from a current state to a desired outcome.

The point of technology roadmapping is simple — to anticipate technology trends and needs and map your pathway to adoption — but the process can be arduous. It can be especially challenging when mapping emerging technologies, with which EA leaders may lack experience.

Impactful roadmaps illustrate milestones and deliverables needed to translate strategy into execution over a specific period. It takes a structured and comprehensive approach to effectively describe and plan change. 

Best practices in tech roadmapping

  • Create a structured practice for the development and evolution of roadmaps by identifying templates, taxonomies and tools that promote consistency, efficiency and clarity, both within and across them.
  • Provide stakeholders the right level of detail by tailoring roadmaps to a specific audience and create excitement around the direction.
  • Maintain traceability across roadmaps to expedite decision making by leveraging business outcome metrics.
  • Enable discovery and usage of roadmaps in order to improve utilization and adoption by publishing and actively promoting roadmaps to their intended audience.

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Frequently Asked Questions

“Digital” isn’t a monolithic strategy, and it’s critical to distinguish between objectives:

  • Digital business transformation means a change in three of the four components of a business model (customers, value propositions, capabilities and financial model) so represents a radical shift in the way an organization delivers value to customers or the segments it serves. Wholesale enterprise business model change is rare; transformation typically happens only in one piece of the business at any given time.

  • Digital optimization improves existing operations and business models. The business model remains the same, but how the organization operates changes. For example, you digitalize key capabilities required to deliver on your business proposition or profit model. Near-term optimization can be a building block for transformation later.

There are four critical components to becoming a more digital enterprise (whether transforming or optimizing):

  1. Digital business strategy to set the direction of your initiatives. A list of unconnected digital initiatives is not a digital business strategy.
  2. I&T operating model to deliver technology initiatives with speed and agility, and effectively connect IT and the business. This model represents ““how stuff gets done.”
  3. Organizational culture that is collaborative and customer-centric and empowers employees to make more decisions by themselves.
  4. Technology foundations, from digital workplace systems to data and analytics

Gartner argues that digital maturity in the IT organization is the sum of four core and mutually reinforcing capabilities: 

  • Strategy. Digital strategy calls for both digital transformation-and optimization-oriented outcomes, but the mix depends entirely on your objectives. (Transformative is more radical and more risky). 

  • Governance establishes decision making within the organization. In mature enterprises, better decision making aligns to value, risk and strategic impact. 

  • Enterprise architecture (EA) must translate business strategy into business outcomes and realizable action plans that inform, operationalize and drive business capabilities, value streams, business processes, I&T decisions and changes to the underpinning and supporting IT estate.

  • IT delivery ensures that the right internal IT services are offered at the expected price and quality levels to sustain IT-enabled business capabilities and assets over time. 

Communicating the business value of IT requires a focus on business outcomes delivered, not IT systems managed or work done.

Gartner urges CIOs to improve the clarity of business-value-of-IT (BVIT) communications by using language, metrics and reports that focus on IT’s impact — not the effort expended — on delivering technology-enabled business outcomes.

No single metric is “the” best at demonstrating BVIT. The most valuable metrics are those that can influence business decision making in your organization.

There is rarely a shortage of metrics so the CIO’s task is to elevate a select few operational KPIs to make them specific to the applications and infrastructure that support specific business outcomes and specific business metrics that are important to stakeholders.

CIOs and their teams require clear visibility into their IT spend to ensure efficiency and strategic alignment. Leading organizations regularly examine and benchmark spending across multiple cost views to facilitate smarter spending and better business outcomes. To do the same:

  • Establish a baseline of your total IT spend and staff levels.

  • Compare total IT spend to industry peers.

  • Identify areas for improvement.

  • Improve IT cost management with multiple views of IT spend.

  • Establish future budgeting or efficiency goals.

  • Shift IT spend to better align to business value.

  • Communicate performance to stakeholders in your organization.

  • Build a compelling story around how IT spend is strategically aligned to enable business objectives.

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