Christopher Gilchrist, Ted Schadler, Fiona Mark, Frederic Giron, and Lee Sustar
Matthew Guarini, Chris Gardner, Keith Johnston, Rachel Kwon, Michael Kearney, and Ian McPherson
Build For The Future Even As The Market Dips
Of the business and IT decision-makers who responded to Forrester’s Budget Pulse Survey, 2022, which we fielded in July, 67% anticipated increasing their tech budgets over the next 12 months, with 26% predicting budget increases in excess of 5%. Our US technology forecast shows a similar story — US tech spend growing 5.4% in 2023. Yet, many prognosticators envision a difficult 2023, with the hardest times materializing later in the year. That means your Board, CEO, and CFO are building options to manage spend to deliver for shareholders, which can be at odds with customer delivery.
That’s a mistake. Customers are vital always. And technology is a critical component of customer success — engagement, revenue, and experience. In fact, 62% of US online adults who responded to Forrester’s Technology Consumer Buyer Journey Survey, 2022 said that technology is more important to them than ever before. With tough times ahead in 2023, many firms will look past these truths and do what they’ve always done — cut costs hard and fast. History shows, however, that winners will make smart decisions today to optimize their technology budgets so they can invest in areas that drive growth both now and when the market rebounds. Tech execs should take six actions in 2023 to position their companies for market leadership when the rebound comes:
- Build bench strength as competitors slash staff too deep. Yes, cuts may be required, but be smart. Focus on using technology where possible to do the job, and then zero in on skills and capabilities to maximize your ability to deliver. But avoid layoffs in the technologies and skills that keep you safe and resilient and the ones that allow you to differentiate. Cutting there would backfire as your high-performing talent shows itself the door and proves hard to refill when the market rebounds. Future fit tech execs will leapfrog the competition by investing in talent now and preparing for the future. Build the new model with two commitments. First, focus on skills that deliver business outcomes and build your organization in a smarter, more adaptive fashion. Second, upskill and preserve talent in key, differentiating technologies like automation fabrics, AI/ML, security, cloud-native infrastructure, and software development. Capital One stays nimble and retains engineering talent with work in agile teams on products that matter and with a strong focus on professional development with its Developer Academy and Tech College.
- Prioritize short-term investments with clear CX and EX outcomes. In Forrester’s Budget Pulse Survey, 2022, about 75% of technology decision-makers ranked aligning IT performance to business outcome metrics and linking investment initiatives to strategic business objectives as high or critical priorities. The pandemic taught us that there is no substitute for great customer and employee experiences (CX and EX). Understand the critical technology touchpoints along customer and employee journeys to identify and prioritize where to make commitments that realize growth effectively. Invest in monetizing data assets to strengthen customer outcomes and dedicate resources to automation and open-sourced tools to increase employee productivity. For example, Verizon 2.0 aims for a more agile environment in which technology enables employees to achieve a deeper understanding of customer needs, bringing EX into how the company creates better CX and fuels growth.
- Rationalize and invest in a strong cloud strategy. Technology budgets multiplied in the go-go years. Cloud spend spiked in the pandemic. Not all of this sits in the tech budget: The average business and technology professional respondent to Forrester’s Priorities Survey, 2022 said that 39% of technology spend, which includes cloud in all its forms, comes directly from business budget holders. You likely have chaos and overspending. It’s time for the great decluttering in your cloud strategy. To start, create an owner for cloud costs and embrace FinOps cloud financial management. If your AWS-committed cloud spend hampers cost-cutting, use the leftover funds for other needed services from AWS partner vendors. Use cloud cost management and optimization solutions to find unmanaged resources, shut down redundant assets, remove unnecessary access, and refine billing. These solutions cover public and private cloud and forecast cloud spend for greater efficiency. British retailer Sainsbury used cost-management tools from Apptio to give engineering teams clarity about cloud costs. A/V technology company HARMAN used VMWare Cloud Health to save $1 million in annual spending on its AWS and Azure estate. Brewer Carlsberg Group worked with Flexera to optimize AWS in a wider IT asset management (ITAM) effort that saved $400,000.
- Shift your innovation to resilience that will provide long-run market advantage. According to Forrester’s Future Fit Survey, 2022, 87% of business and technology professionals at future fit organizations strongly agreed that innovation was critical to making their organizations more resilient. The fact is that you cannot abandon innovation — it is the life blood of your growth and differentiation. Instead, plan to prioritize your innovation spend to deliver greater resilience. Resilience done right delivers more than risk mitigation — it provides competitive advantage for all stakeholders. Investing in resilience (including technologies like AIOps) will better prepare you for the next black swan event and will provide the solid foundation you need while chasing new opportunities. Be pragmatic with innovation, focusing on flexible technology that enables quicker changes to intended business behavior. For instance, a large North American healthcare company is shifting to value stream funding to innovate those capabilities that deliver value to customers, emphasizing customer impact and the capabilities that support it across the portfolio.
- Optimize your service provider estate and capture pricing opportunities. If you’re like most firms, you have hundreds of professional and outsourcing service providers and 10 or more on any single large project, such as a packaged app implementation. Best practice for a Global 2000 company is six or eight primary providers that can help with end-to-end work and bring a large portfolio of expertise and capacity. Augment these major providers with a few dozen specialists and boutiques as needed. To move toward the optimal lineup in 2023 and position you for the rebound, do as a global life sciences company has: Inventory your current providers, prioritize co-innovation partners using Forrester’s provider assessment tool, and begin the tough internal negotiation on which providers to keep. Then leverage those future partnership agreements to negotiate on pricing, commitments, and contracts aimed to grow through the downturn. You can expect to trim 3% to 5% of your total services spend with this approach.
- Position tech leadership at the highest levels of your organization. Look no further than crisis to understand why rapidly translating technology decisions into business value has never been more important. Continuously increase transparency with how you plan, execute, and communicate tech’s value to your C-suite peers. Demonstrate how each decision directly impacts top and bottom lines, reinforces sales and operating margins, and puts the company in a position to be stronger beyond 2023. Leverage governance practices to thoughtfully challenge the intent of funding, policy, risk management, and performance decisions so that each choice aligns with the strategic business objectives across the organization. This will require you to work closely with the CEO and the broader C-suite to ensure that tech is a differentiator, not an enabler.