The new reality following the COVID-19 pandemic requires IT strategies that make sense of new elements of cost, agility, value and risks.
In response to mounting uncertainties, businesses have had to rethink their IT spend and get creative at ways to cut costs, even as it becomes clear that our future will be digitally driven.
Gartner, for one, has urged organizations to find their “TechQuilibrium”, a technology equilibrium point that defines how digital an enterprise needs to be to compete or lead in a digital society.
Increasingly, businesses will need to actively align their IT infrastructures to drive business outcomes, such as migrating to the cloud, to adapt to economic fluctuations amidst constraints. Yet, a myriad of concerns has hampered the adoption of such technologies, with businesses possibly delaying long-term digital transformation initiatives to mitigate financial instability risks.
Nutanix’s latest hybrid cloud report revealed that 60% of Singapore businesses have delayed transitioning to hybrid cloud models, citing costs as a top concern, despite the proven benefits of flexible cloud configurations.
How, then, can businesses in Singapore – and other economies in Asia Pacific – optimize and rationalize their IT budgets in a fast-accelerating digital economy? DigiconAsia discussed this issue and more with Ho Chye Soon, Singapore Country Manager, Nutanix:
What does IT budget rationalization mean for businesses post-pandemic, and how can businesses in this region reach their ideal digital ‘TechQuilibrium’, to use Gartner’s term?
Ho: If there is one thing the pandemic has illuminated, it is the need for business adaptability and agility. Businesses are seeing the need to constantly adjust to changes – from new legislations around safe distancing measures to embracing technology – and seek business opportunities amidst a crisis. Change is the only constant, and constant change needs to be factored into IT budgets as well.
Businesses that want to recover from the pandemic – or even better, thrive in this constantly evolving digital economy – need to understand exactly how much they should digitalize to achieve this outcome. This leads us to what Gartner has called the TechQuilibrium. It refers to the balance point where an enterprise has the right mix of digital and traditional assets and capabilities to compete most effectively in an industry that is being digitally revolutionized.
Hence, rather than cost-cutting, businesses should adopt IT budget rationalization, balancing the two opposing ideas of budget tightening and investing in growth and innovation.
One way to do so is through the relocation of priorities and resources. Experts have pointed out that many budget-tightening strategies have driven IT to move a handful of critical capabilities to the top of their priority lists, such as support for remote workers, computing and storage, cybersecurity and managed cloud services.
These investments can be further optimized by shifting to hybrid and multi-cloud strategies. However, as mentioned earlier, IT budget rationalization requires a delicate balance to ensure compatibility and consistency of infrastructures across business functions, even as business priorities change. Finding this balance will save businesses critical time, money and resources by avoiding a complete re-engineering effort.
With a gloomy economic outlook ahead for the region, cost has become a key consideration for businesses. What are some key justifications for investments in digital innovations in this ‘new reality’?
Ho: The pandemic has undeniably accelerated digital transformation, and, for some businesses, it has also created the necessity for increasing technology investments. According to IDC’s 2021 predictions, many of the initiatives that started to help ensure business continuity or mitigate the economic impact of the health crisis have become permanent requirements for success in the digital economy.
Businesses now find that they need to accelerate their pace of technology adoption. They can no longer return to pre-pandemic processes, as these have become outdated.
For instance, Nutanix’ Hybrid Cloud Survey 2020 recently revealed that hybrid cloud will shape the future. Singapore respondents have expressed optimism about adopting such innovations, citing improved resource allocation (54%), easier collaboration across locations/departments (54%), and reduced operating costs (40%).
If businesses keep an open mind about investing in digital innovation and actively customize their IT infrastructures in their quest to achieve a state of TechQuilibrium, they will inevitably reach a point of having the right technology to best support their business needs.
How could businesses effectively unlock benefits such as reliability, agility, long-term value, and economies of scale, from their IT and cloud strategies?
Ho: Businesses should look to hybrid cloud infrastructure to truly gain a competitive advantage, as it allows them to leverage the full benefits of cloud technology. A hybrid cloud approach delivers the benefits and convenience of the public cloud, together with the security of a private cloud, without compromising efficiency and cost. With this approach, businesses are also empowered to move applications across clouds with ease and gain greater control of their IT spend, while remaining confident in the security of their data.
Businesses can further optimize their hybrid cloud investments in two ways: Subscription models and scalability. A subscription model provides businesses with the flexibility to invest in cloud based on their budget and requirements – a much needed flexibility especially in times of economic uncertainty.
Additionally, cloud-based business technology facilitates active customization through flexible on-demand usage and scalability. These are cost effective as users do not need to be concerned with maintenance and servicing. The key is for businesses to gain the freedom to run any application at any scale. This way, business leaders can focus on growing their businesses and not worry about whether they have the IT to support it.
For example, financial services institutions (FSIs) can leverage hybrid clouds to build an IT infrastructure that is simplified and customer-centric. FSIs can tap on clouds to gain agility to bypass the often cluttered and complex processes of traditional hardware-based IT infrastructure, without significant disruption or higher cost. It is an approach that has found considerable success in the finance industry.
Further, for small and medium sized businesses (SMBs) and start-ups, hybrid cloud presents a cost-effective solution offering flexible purchasing models that can obliterate barriers to entry. With cloud’s simple, agile composition, smaller businesses can quickly spin up value-added services that give them an edge over competitors.
What are some economic principles that will help businesses strike an optimal balance between risk, cost and speed?
Ho: As with any investment, ROI analysis provides a framework for IT decision-makers to move out of their comfort zones and make the best technology choice for the future of their businesses. Accurate analysis should ideally go beyond the superficial and account for all the costs that could impact a solution.
The COVID-19 situation has demanded that businesses make critical operational changes. The businesses that have kept their eyes on the long-term prize and made decisions based on a fully developed ROI analysis shall find themselves in advantageous positions as we emerge from the crisis.
Additionally, the way business leaders think about IT needs to be reframed. Businesses should move away from considering IT as a siloed cost center, and instead see it as a strategic, value-adding asset within their organization. IT teams play critical roles in examining processes and workloads, allowing businesses to better control costs, optimize processes, and tailor specific business architectures and strategies that can directly impact business outcomes.
After all, choosing an IT infrastructure or platform is not all about minimizing costs. It is about satisfying business objectives too.