How CIOs will be making their technology investments in 2020
For CIOs, 2020 will be the year of visibility and accountability, with an increased focus on gaining accurate IT infrastructure insights to make data-driven decisions around investments in IT. Growing scrutiny around investments will no longer be purely in the interests of reducing and managing costs, but also for the purpose of making the right strategic investments to support business initiatives.
This is due to the recognition that the combination of business-critical applications and the infrastructure supporting them are core to delivering goods and services to the market and driving revenue. This has always been a bottom line consideration, but now it is becoming strategic to the top line as well.
Market consolidation and the monitoring company acquisitions that took place in 2019: Cisco’s interest in Datadog, reinforced by their wildly successful IPO; the acquisition of SignalFx by Splunk and Virtana’s own acquisition of Metricly, are all indicators of this need for visibility and improved decision-making around workload placement in the age of hybrid IT.
IT will shift from supporting the business, to becoming the business
For CIOs in 2020, the view of cost or investment will shift from asking: “how do I purely reduce cost and drive increased capacity at a consistent cost?” to, “where do I need to invest to drive competitive advantage in a way that will increase revenue?”
CIOs will also look to where they can ease up on investment if it is an IT cost tied into the revenue chain that is not delivering a core business service. In this way, IT plays a part in delivering the business services, becoming part of the revenue chain.
2020 will see a marked increase in financial scrutiny on the part of CIOs, which will not only be driven by cost reduction, but also by the need to make strategic investment in IT to support business objectives.
The focus will not only be one of investment, but also of monitoring and therefore visibility to drive and deliver the data to make better decisions, with the increased application of technologies such as AIOps to drive efficiencies. And while organisations will also be actively seeking out ways in which they can automate within the data centre, this will take the form of augmentation (where decisions are still made traditionally) rather than by entirely replacing human roles. So there will be a renewed focus on IT as strategic to the business, both on-prem as well as in the cloud.
The marriage of IT and the bottom line will be a focus in 2020
The overarching performance and availability of the IT infrastructure supporting the business will become even more critical. Therefore, CIOs will seek to be better informed in advance of making any investments, as it is not just about visibility to cut costs, it is about the ability to make data-driven investment decisions to deliver back to the business services.
Questions from executives within more traditional industries, tends to boil down to essentially managing two IT paradigms, the first being: “how do I run the business?”, which is all about effort on sustaining the business. The second is: “how do I change the business?”, which is where effort is expended on innovation. Investments are being made in both, but a noticeable shift is being seen towards the “invest and change” the business paradigm, from the more traditional stance of investing in sustaining business as usual.
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Cloud decision-making will be driven by ROI, cost and performance trade offs
One of the key realisations in 2019 was that cloud is not cheaper than on prem architectures. Many CIOs and CFOs had a wake up call in 2019 when they got much larger bills from Amazon and Microsoft than they had anticipated.
The “less expensive” premise under which cloud has historically been sold has now been clearly disproven. As a result of this, cloud may not be the optimal choice for all organisations. Many, including many of the leading SaaS providers, operate with better cost-savings on-prem, delivering SaaS but running a traditional data centre to do so.
Some companies have reported running at as much as 30-40% lower cost than with an equivalent public cloud capability. So if an organisation is focused on IT as a differentiator that is driving top line where its IT investments relates to cost of goods, it is possible to drive efficiencies that can save 30+% over typically leveraging IaaS in the cloud.
So in 2020, CIOs will be looking to rationalise that expense and manage the placement of workloads between on-prem and cloud options based on cost and performance trade offs, hence the rise of the hybrid infrastructure. Cloud decisions will become a lot more rational, made around the true costs and dependant upon the return on those investments.
The rise of the SaaS approach in traditional companies
2020 will also see a significant increase in the number of up-and-coming Software-as-a-Service (SaaS) organisations, such as RealPage and Plex Systems, disrupting various traditional industries. Such companies already have a clear and leading-edge visibility and understanding as to how their applications are being developed and released and how the underlying infrastructure is being consumed to deliver business value.
These are innovative companies where the combination of software applications and underlying supporting infrastructure replaces traditional bricks and mortar to become the business itself. Whether it be a self-service portal, a claims management system for an insurance company, or an online banking capability, these are all essentially the same construct as a pure play SaaS company, where the applications and supporting infrastructure are viewed as an essential part of the product offering.
Increasingly, traditional organisations will start to view IT applications and infrastructure as being core to driving and delivering the business and therefore pivotal to revenue, the same way as SaaS companies have always done. There has always been an acute awareness of cost, but where the IT infrastructure carries a cost of consult, increasingly we will see more traditional companies in various verticals looking to deliver their capabilities in SaaS.
The supply-chain ripple effect on the end user
In 2020, a concerning supply-chain effect impacting customers will get the attention of CIOs. For many organisations, two minutes of downtime can equate to two or more hours of a customer being down. For some, cloud is not viable, as it cannot always guarantee the availability organisations’ customers have come to expect.
For example, Plex Systems runs a traditional IT infrastructure to deliver their SaaS offering servicing the manufacturing industry. With a representative customer generating $250-$300 million in revenue a year, two hours can equate to somewhere in the region of a couple of million dollars in lost product. So this issue can impact not only the organisation losing revenue, but also that of its customers.
With insights and thorough data-driven decision making however, Plex Systems elevated its capability to deliver five-nines (99.999%) availability on its internal infrastructure, far exceeding the service level agreement (SLA) any cloud provider could offer.
In 2020, the C-suite will be forced to recognise that there is not just impact to its own organisation’s bottom line to consider, but there is also the potential of a ripple effect into their customer base.
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The Chicken and egg situation of organisational agility
It is an interesting juxtaposition that the push towards greater organisational agility and the rise of DevOps is both driving that change, and is also a reaction to it. So depending on the organisation, there can be a chicken and the egg scenario, where in some cases, the act of the business adopting agile capabilities forces a shift in infrastructure, and IT operations, and that in turn increases a marriage between the two and therefore a greater demand for visibility.
In other instances, the need for faster time to market between products and services is driving change in IT, so it is being driven from both directions. As the business is being driven to become more agile in order to become more competitive, the effect impacts across the applications, Dev Ops and IT Ops teams.
Likewise, change may be driven from the applications team, impacting the Dev Ops and IT teams, as it ricochets up to drive advantages for the business. Ultimately, the demand for increased scrutiny, visibility and accountability that will be evident in 2020, is being driven from both sides.
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