Doubling Down: Navigating Technology Transformation Though Uncertain Economic Environments

Organizations that double down on transformation initiatives, while reducing costs and focus on automation, integration, and cloud-native experiences will likely be best positioned to navigate the economic headwinds that appear on the horizon as we move into 2023.

These were among the conclusions to emerge from a recent executive roundtable of senior technology executives from organizations representing a broad array of industries across the country. The discussion, hosted by the editors of CIO.com and executives from IBM, explored the strategic, operational, financial and technological issues that will likely emerge as key levers as organizations prepare for an uncertain business landscape through 2023 and beyond.

The initial instincts of many organizations will be to cut back or hold off on moving forward with strategic infrastructure, application and other important IT investments. But even recent history tells us that this would be a mistake, suggested Arnab Bag,IBM Consulting Americas Modernization Leader.

"Organizations that accelerated their efforts to digitally transform their organizations through the COVID-19 crisis ended up being those in the best position to address the challenges presented by the stresses placed on the business landscape. It is what we have seen in every other recession. Enterprises that have embraced modernization have tended to come out of downturns more differentiated and stronger economically," said Bag.

Nevertheless, as the global economy faces the prospects of further decline in 2023, organizations are assessing the impact that the changing landscape will have on modernization initiatives in different vertical sectors of the economy. The picture is far from clear, according to analysts at IDC, especially in the United States.

The reason: very mixed data. Competition for labor continues to challenge organizations' ability to find the technical talent needed to maintain current enterprise IT operations. In addition to significant skills shortages in IT, rising cybersecurity threats, evolving climate regulations, and assertions of sovereignty over digital business triggered by the Russia-Ukraine War complicate the picture.

While 63% of the CIOs surveyed in 2022 by IDC indicated plans to make targeted reductions in IT spending -- even reduce overall IT budgets -- many organizations continue to invest in strategic technology projects to support business initiatives. This includes spending on analytics, automation, CX, EX and supply chain transformation solutions deemed essential for broader digital transformation efforts.

"All of these factors call for greater investments in efforts that elevate the ability to deliver higher revenue through different products, services and business models," said Aparna Sharma, Managing Partner and General Manager of Hybrid Cloud Services at IBM Consulting. "The skills and talent shortage will only get more severe as we move into the new year, which is why it is also paramount to pursue efforts that enable enterprise-wide automation," she added.

As the right people with the proper knowledge become more challenging to find, applying proven innovations in AI and AIOps will be essential for IT departments -- across industries to deliver the performance and differentiation necessary for remaining competitive in a stressed economy.

"That is why leading companies are thinking very hard about whether it is possible to take their core to the cloud and/or if they should develop new cloud-native applications on-prem. IT departments are under pressure to develop and deploy applications and products that provide digital experiences, that are highly responsive to customer demands and competitive developments," said Sharma.

The details associated with answering these questions will be different for every organization. For most executives, however, strategic modernization initiatives will likely have to be implemented to maintain – and perhaps even make gains in – market position through the middle of the decade.

"There is a big difference between this downturn and those we have seen in past decades. Today, IT's role is not just about cutting costs. It's about leveraging technology. We have to figure out: how to leverage the cloud; how to build talent; and how to develop the agility necessary to bring differentiated products and services to market quickly…even in a difficult economy."