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Tag: IT Budgets

  • IT Teams Need to Do More With Increased Budgets

    IT Teams Need to Do More With Increased Budgets

    A survey of 600 C-suite and IT decision-makers published today found the majority of organizations are trying to make increased IT budgets stretch even further as costs rise and the number of workloads deployed continues to increase steadily.

    Conducted by SoftwareOne Holding AG, a provider of software and IT services, the survey found 93% of respondents expected IT budgets to increase, with 83% planning to invest more in application modernization. However, 83% also noted they are under pressure to stretch budgets even further as part of an effort to increase agility (46%), improve customer experience (45%) and improve security to support remote workforces (45%). A full 92% said they would be increasing investments in security.

    The core issue that IT leaders are wrestling with appears to stem from increased cloud costs. The survey found the primary causes of those increased costs are inflation-related price hikes passed along by cloud service providers (41%), workloads exceeding planned capacity (40%), transformation initiatives that are cloud-dependent (40%), fewer cloud discounts (37%), lack of visibility into and management of cloud costs (34%), overprovisioning (34%), repercussions from previous lift and shift efforts (34%) and shadow IT (30%).

    Craig Thomson, senior vice president of cloud and application services at SoftwareOne, said that technical debt is having a significant downstream impact across organizations. For example, the survey found 72% of respondents reported that digital transformation initiatives are falling behind, with 38% noting the accumulation of this debt stems from rushed cloud migrations throughout the pandemic. Just under a third (31%) failed to optimize workloads before commencing the migration. More than a third (38%) admitted their organization miscalculated the cloud budget.

    Progress is being made, however, with 45% of respondents reporting they have improved transparency and control of cloud costs. A full 80% planned to increase their investment in financial operations (FinOps) to achieve this, and 39% said they would use cloud-native tools to reduce licensing costs.

    Those efforts suggested IT leaders are being very deliberate in their approaches to reining in costs while at the same time embracing best practices, said Thomson. IT leaders have finally started to realize the cloud is not so much a destination for workloads as much as it is an operating model, he added.

    The challenge is that cloud computing environments are becoming more complex to manage as organizations deploy cloud-native applications on Kubernetes clusters and serverless computing frameworks deployed alongside legacy monolithic applications that were lifted and shifted to the cloud. Organizations will need to invest more in automation to make up for an IT talent gap that prevents organizations from accelerating the rate at which they can build and deploy cloud applications, noted Thomson.

    On the plus side, it appears organizations are willing to allocate budgets to achieve their IT goals. The issue is that, as more organizations become more dependent on software, they are asking IT teams to do even more with the resources at hand. The degree to which that can be achieved, of course, is almost wholly dependent on how much of the technical debt that already exists in the cloud can be retired.

  • Focus on What You Can Do

    Focus on What You Can Do

    Here we are in the second half of 2022 and the writing is on the wall. No matter how much budget you have had in the last few years, be it large or small, it is going to shrink. This is cyclical, and should not be a surprise. The amount of budget shrinkage may be larger, but budgets have fluctuated since before any of us were born. I would argue that they fluctuate in IT more than any other part of the business, simply because much of IT is still viewed as overhead and, honestly, we’re expensive. Our salaries, our equipment, our software and our SaaS cost a lot, making them juicy targets when corporate belts have to tighten.

    So let’s talk about what to do for the next year (or five) while things finish sinking and then start to recover. New projects will be few and far between but improving what an organization already has deployed costs little. And the “Do it now” mentality of Agile and DevOps has helped in a ton of ways, but honestly leaves a trail of “could be better” implementations behind. Implementations that you can use iterations to improve. My “Look at me! I’m a pundit too!” recommendations would be:

    1. Review
    2. Consolidate
    3. Evaluate
    4. Iterate

    Review what you have across the entirety of the org. I’ve made this recommendation before—possibly even as recently as six months or so ago—but it bears repeating. We had a phase where teams and even individual developers made choices for a product or product line. This created a lot of overlap. List tools used at each step of the DevOps chain; for each project/DevOps toolchain.

    Consolidate. In the short term, costs need to go down and be sustainable once they do. Better to eliminate software or SaaS redundancy than that other kind of redundancy. This step also means simplifying the corporate DevOps infrastructure. So compare products doing the same job and choose one. This isn’t as easy as pundits make it sound; each product brings something unique to the table. But you have to make the hard choices and reduce maintenance costs and hours.

    Evaluate. This is not hard to believe for anyone who has worked at multiple organizations, but in case anyone missed it, no environment is perfect. They all have strengths and weaknesses. The best staff in the world, given unlimited time and budget, will do at least one dumb thing. Then after a year, a lot of the smart things they did look dumb too—because the market and/or the technology have moved on. Look at each step of your environment—from which libraries/modules are included to the deployment steps and run-time monitoring. Figure out what could be better and then organize by cost and schedule them out.

    Iterate. Start back at the review stage and do it again, because if you think you got it all the first time, you’re wrong. Or you are a heck of a lot smarter and more thorough than the rest of us, one of the two.

    This will keep the team improving the corporate IT environment while outside factors keep budgeting down. This cycle is different from others because it is unclear how IT staffing will be impacted. While it is looking more and more like IT will have the same impacts as usual, at the start of this downturn that wasn’t at all clear. Either way, improving the environment without million dollar projects is useful in hard economic times. My company is currently reconsidering our choice of frameworks and how we’re still using a test tool as DevOps management tool, for example.

    Keep the lights on, keep rocking the servers and apps running the org and focus improvements around factors you can’t change. But keep making it better, no matter what’s going on around you.

     

  • A Pandemic Side Effect: Rampant Technical Debt

    A Pandemic Side Effect: Rampant Technical Debt

    On average, about a quarter of all IT budgets are allocated to handling technical debt each year. And this figure is set to rise, as 68% of organizations say their technical debt will increase in 2022. As digital acceleration continues to drive more IT investment across divisions, the technical burden almost seems like an inevitable outcome of delivering more software and amplifying end-user experiences.

    Unsurprisingly, IT budgets are set to increase this year. This has been a stable trend throughout the pandemic as even companies that are not traditionally technical increased their reliance on software. Most teams quickly moved to remote working arrangements and acquired additional software tools to keep internal operations afloat. Not to mention the new complexities and array of tools emerging to support the microservices design paradigm.

    Although new tech adoption is vital to enable key initiatives across a company, unbridled technical debt can also inhibit digital transformation initiatives. Software AG recently released its Situation Report 2022, a survey that analyzed the state of technical debt among IT professionals in 2021 and technology adoption forecasts for 2022. Below, I’ll review the key points from the report and consider how organizations can respond.

    Increasing Reliance on Tech

    The growth in this area is astounding—78% of companies say their technical debt rose in the last year. A full 38% of companies reported taking on a great deal more; at the same time, IT budgets are set to increase for most organizations in 2022. On average, this increase is expected to be 37.1% higher than 2021 spending. It’s easy to correlate increasing technical debt with these IT budget increases.

    A large portion of this increased spending is related to digital transformation. This checks out; modernizing existing technology is a top priority for 19% of tech leaders. Other top priorities include exploring new technologies (17%) and decreasing technical debt (15%). Though managing technical debt is not ranked as the highest priority for IT leaders, it still ranks as a pressing concern due to its ability to hurt innovation. The report found that 69% of companies admitted it has caused their digital transformation initiatives to slow.

    Perceptions of Technical Debt

    So, what are the leading causes of technical debt? It turns out that most stems from recent modernization and digital transformation efforts. In fact, 39% said new digital products were a major cause. This is followed by infrastructure modernization (34%), data analysis and integration (32%) and new customer-facing services (27%).

    Interestingly, not all technical debt is bad. Often, IT professionals say the benefits justify the expense. For example, 86% say that increasing product or service launches justifies taking on tech debt.

    Technical debt is also a result of the remote nature of today’s hybrid work environment. During the pandemic, businesses made many concessions to enable remote work and adopted new collaboration and development tools to enable productivity. As a result, 88% reported the pandemic increased their awareness of technical debt. The majority, 83%, also said the pandemic has increased acceptance of technical debt, a sign that many of these changes are here to stay in the new normal of working life.

    Responding to Technical Debt

    Not all investments lead to the same degree of technical debt; some platforms are bulkier than others. Or, specific software vendor lock-in schemes can prevent lift-and-shift which can swell a technology ecosystem. So, what areas are companies investing in and which are the leading causes of technical debt?

    In 2021, companies invested heavily in cloud computing (60%), integration (43%), IoT (39%) and 5G (39%). Investment strategies will change slightly in 2022, with 5G becoming the top most-invested area at 45%. Cloud computing drops to 42% and edge computing is rising to 35%. Mapping where new investments will occur can help organizations anticipate the repercussions. Of these investments, 60% of IT professionals ranked 5G as a leading cause of technical debt. Other high producers include cloud computing, IoT and blockchain.

    In 2021, companies spent 24.8% of their IT budget handling technical debt. Managing it presents some significant challenges—32% say siloed data and processes are a key challenge when addressing technical debt. Limited budgets, regulations and a lack of internal alignment also get in the way. Clearly, resolving the issue requires both inter-department collaboration and a hefty budget.

    Final Thoughts

    Technical debt is, arguably, unavoidable as companies adopt cutting-edge technologies to remain relevant. And, taking on more technical debt is often intentional; for example, new DevOps tools are helping increase deployment fluidity and manage complex cloud-native architectures. Or, new SRE platforms bring observability and monitoring capabilities to improve application reliability. A newer programming language may be more performant, while a low-code abstraction layer complements an engineer’s workflow. In all these scenarios, the benefits often outweigh the added debt.

    Yet, much of it is unintentional and is slowing innovation down. This could be shadow APIs or forgotten rotting legacy infrastructure. Sluggish code and un-optimized routing between applications can also be a drag on resources. The reason these situations sound murky is because technical debt, itself, is difficult to quantify. And, only those addressing it with adequate visibility into their stack will have a clear indication of how much debt there really is.

    Though the current pandemic has indeed amplified technical debt, things will always evolve and new trends will replace the old. In the digital era, some degree of tech debt is inevitable within a large organization. The key will be effectively managing it over time to maintain a healthy, lean codebase and progressively release features that meet the demands of new customer experiences.

    The Software AG Situation Report 2022 surveyed 700 IT professionals on their software usage and annual predictions at the end of 2021. For more insights, you can read the full report without an email gate or paywall here.

  • Management and Culture

    Management and Culture

  • Coronavirus Impact: Enterprises Must Focus on What Works

    Coronavirus Impact: Enterprises Must Focus on What Works

    As the economic slowdown continues, CIOs, CFOs and enterprise technology teams continue to grapple with frozen budgets and how their enterprise will keep their operations functioning as they attempt to move forward with crucial digital transformation efforts, and possibly shelve those initiatives deemed less critical.

    How are CIOs deciding what projects get postponed? Many projects underway now are focused on business continuity and supporting remote work, but that can’t be the only focus for CIOs and enterprise technology leaders.

    Miles Ward, CTO at business-technology consultancy SADA Systems, said there is a substantial shift to enable staff to productively work from home, increase flexibility in spending and to automate operations, and rely increasingly on managed services so that demands on operations personnel are reduced.

    “Projects outside of those focus areas are going to get deprioritized unless they’re in the very final stages of delivery, where stopping creates more waste than it could prevent,” said Ward.

    According to a recent survey from Dresner Advisory Services, 61% of respondents said projects and budgets will be impacted by the pandemic, with sizable majorities reporting the same in Asia Pacific, Europe, Middle East, Africa and North America. The biggest impacts are expected to be in operations (manufacturing, supply chain, services) at 89%, executive management at 83%, marketing at 75%, finance at 65%, IT at 60%, research and development at 60% and business intelligence at 56%.

    Dresner Advisory Services found that those organizations with more than 5,000 employees expect the lowest level of impact, while organizations with 1,001 to 5,000 reported the highest level of impact.

    Jarod Greene, general manager at the Technology Business Management Council, said a great amount of uncertainty surrounding COVID-19 remains, including the rippling health, economic and business impact. It all presents an incredible challenge for all business leaders.

    “CIOs and other IT leaders, specifically, are in the thick of this challenge, [and they are] not only responsible for maintaining the continuity of operations and seamless work experiences but also factoring in the short-, mid- and long-term financial impact of their decisions,” said Greene.

    Greene contended that CIOs play a vital role in times like these, and that they can help organizations to clearly understand the costs and corresponding value of their technology investments, and therefore can advise business leaders of informed tradeoffs, rather than merely widespread cuts.

    “Conversations I’ve had with Technology Business Management Council members over the past days and weeks have focused on re-planning and forecasting and the execution cost optimization exercises—with the ability to measure the impact of those decisions,” said Greene.

    Time to Invest in Measurable Impact

    For many organizations, the focus has shifted to delivering improved technology experiences to customers.

    “The dot-com bubble burst and 9/11 may seem like ancient history to some. These were events that forced businesses to focus on what’s really important: providing value to customers and investing in projects with measurable impact on revenue and cash flow,” said Vaclav Vincalek, partner at business-technology consultancy Future Infinitive.

    “The cash shortage refocused management teams on what was vital for their businesses. The current situation will be no different. Business will have to adapt to a new environment and adapt quickly. Companies with well-planned strategies will adjust some tactics. If they’ve already planned for change and aligned with their vision, they’ll continue to succeed with focused execution,” said Vincalek.

    Alex Miłowski, platforms researcher and evangelist at Redis Labs, agreed.

    “Essential services, especially customer-facing communications systems, are likely to face surges in demand. As such, it is important to meet those demands rather than pull back and postpone,” said Miłowski.

    “It very much depends upon what type of business you are in. It’s not all doom and gloom. It hasn’t been for us, or for many of our customers,” added Kevin Grice, director of digital transformation at Trace Solutions. “That said, I think it’s a fair assumption that there will be widening ripple effects through all parts of the economy—so there are likely to be challenges ahead. How big the ripples are, and how long they last, is yet to be seen.”

    “Many companies have gone into a temporary lockdown, with a freeze on all development to reduce risk and the possibility of additional costs in a time of reduced cashflow. However, if this emergency goes on for any significant length of time, that approach will soon become unviable. So businesses will have to adapt,” said Grice.

    Not all companies have retrenched and have decided to keep moving forward with investments.

    “At Laserfiche, we currently do not have any projects on hold, rather, we are working to accelerate any [projects] that are related to business process automation as it helps the workforce. Content management and automation will continue to lead upcoming projects. As IT leaders, we have a responsibility to get things scaled quickly. The challenge we have is being agile and adapting to our ‘new normal,’ but we’re continuing to move forward,” said Thomas Phelps, Laserfiche’s CIO.

    Laserfiche isn’t the only company that has decided to keep moving forward. A survey of 317 CFOs, from research firm Gartner, found that 38% of those surveyed don’t have any plans to cut costs, and only 16% of CFOs said they plan to cut IT by more than 10%.

    What does Gartner advise enterprises do? Essentially, to do what they are doing: focusing more on what works and cutting the deadweight.

    “Where there is excess scope in their organization’s product or service portfolios, the hidden costs of complexity drag down profitability,” Dennis Gannon vice president, advisory at the Gartner’s finance practice said in this statement. “The best CFOs will use COVID-19 as the catalyst to derive significant operating leverage from their most profitable lines of business without destroying value.”

  • Coronavirus Economic Shutdown: Analysts Hit the Brakes on Global IT Spending Estimates

    Coronavirus Economic Shutdown: Analysts Hit the Brakes on Global IT Spending Estimates

    By most accounts, 2020 was set to be a pretty good year for U.S. gross domestic product and enterprise IT budgets. That was before the novel coronavirus, and the subsequent economic shutdown that is designed to blunt its spread and avoid overwhelming the nation’s health system. Analysts are now slashing their economic growth rates and enterprise technology spending estimates.

    Previously, research firm IDC estimated that real GDP in the U.S. would reach 2.4%, but downshifted that to a “pessimistic scenario” of 1.4%. While IT spending dropped from an expected 5.1% year over year growth to a pessimistic scenario of 1.3%. The base scenario for GDP growth is now 2.0% and for IT spending 4.3%.

    “The pessimistic scenario is not a worst-case scenario,” said Stephen Minton, vice president in IDC’s Customer Insights & Analysis group. “Things are moving so quickly that we need to constantly recalibrate our assumptions and expectations, but the pessimistic scenario reflects an IT market in which weaker economic growth translates into weaker business and consumer spending across all technologies over the next few quarters. Things could get worse, but hopefully not.”

    Earlier this month, Forrester analyst Andrew Bartels wrote in this post that the U.S. and global technology market spend will slow to 2% this year.

    “That assumes the U.S. and other major economies have declined in the first half of 2020 but manage to recover in the second half. There is also a 50% probability that U.S. and global tech markets will decline by 2% or more in 2020 if a full-fledged recession hits,” Bartels wrote.

    Not all areas in technology will be impacted equally. Forrester expects there will increased demand for cloud infrastructure services, specialized software, communications equipment and telecom services for remote work and education.

    However, Forrester expects computer and communications equipment to potentially decline 5% to 10%, while technology consulting and systems integration services spending could be flat to down 5%, should companies really belt-tighten.

    “Software spending growth will slow to the 2% to 4% range in the best case and will post no growth in the worst case of a recession. Tech outsourcing and telecom services will hold up better, though contract revisions could cause spending to go down, as well,” stated Bartels.

    S&P Global Ratings also predicts slowing IT spend. According to its update, Global IT Spending Set To Slide As Coronavirus Hits Hardware Sales, S&P Global economists cut their global GDP growth rate by more than half to 1% to 1.5% from 2.8%—in just two weeks.

    “We believe the spread of the coronavirus will hurt enterprise and consumer IT spending across the globe with particularly bleak ramifications for the hardware and semiconductor segments. However, we expect some of the deferred spending to return gradually in the latter half of this year through heavy government stimulus in the U.S., China, and elsewhere,” wrote S&P Global Rating Analyst Andrew Chang.

    S&P Global Ratings anticipates IT spending to decline 3% year over year, compared their prior estimate of 2% to 3% growth. S&P Global Ratings expects some of the biggest hits to hardware, with smartphone revenue falling to negative 9% from up to 2% growth, and PCs to negative 9% from a previous range of negative 3% to a positive 4% growth.

    While enterprise technology budgets are being slashed, the need for business-technology isn’t going away. In fact, it’s accelerating as more knowledge workers shift to working from home, more remote collaboration and keeping legacy systems running and moving forward with digital transformation efforts.

    — George V. Hulme

  • Transforming the Annual Budgeting Process For DevOps

    Transforming the Annual Budgeting Process For DevOps

    The annual budgeting and planning cycle is the one process that touches all of IT. It has impact on how decisions are made, teams are organized, work is delegated, projects are started (and/or ended) and responsibilities are allocated Yet, few people think about realigning and transforming the budgeting process for DevOps.

    The Problem with Current Budgeting Processes

    The annual budgeting process is inherently flawed. It requires executives to predict the future (sometimes 12 months in advance), allocate resources accordingly and lock in the funding. And if that is not bad enough, once budgets are set, they spend the rest of the time reconciling between today’s needs and yesterday’s predictions.

    Add in personal agendas and organizational politics, and you end up with a system that sucks time, energy and ambition. For an organization looking to be more nimble and responsive, our current budgeting process has the exact opposite effect.

    Budgeting Process for DevOps: 3 Options

    Some organizations are taking a much different approach to help cope with the dynamic demands.

    1. Shorter Cycles and Frequent Reviews

    Learning from our European friends, some organizations are moving to a shorter budgeting and review cycle. The traditional construct of annually funding projects remains, but plans and allocations are revisited quarterly or on a rolling basis. Both business and IT are continuously reprioritizing what features to fund and jointly collaborating on making go/no-go decisions.

    The benefit of such a system is that it allows teams to allocate funds dynamically within the project—it forces teams to think in terms of a minimum viable product, and mistakes in allocations can be quickly corrected. However, there are two major drawbacks. First, funds cannot be reallocated across projects, forcing executives to still wait for the annual cycle. And second, if the quarterly review process is not streamlined, it can create a climate of constant budgeting, where managers end up spending more time jockeying for funds instead of doing real work.

    2. Product-Based Funding

    Others have been experimenting with product-based funding. Here applications and the associated resources are grouped into product teams and are given a share of the total budget. This budget is primarily managed by the chief product owner (represented by either the business/IT), which then further distributes it to her product owners. Just like in the last model, the chief product owner collaborates with the business to decide on go/no-go activities. In addition, it also allows chief product owners to reallocate funds across both products and projects within their portfolio. And the product owners are responsible for executing on the minimum viable feature sets within their allocated funds.

    The benefit of this model is in its simplicity. Instead of making bets on projects, CFOs just have to decide on how the budgets are spread across various product groups. Chief product owners and product owners have freedom to allocate their share as they see fit. As a result, budget decisions are pushed as close to the front line as possible, allowing for greater flexibility and improved market response times.

    A prerequisite to this method requires IT to move from the functional organizational model to a product model—not an easy task. As for the drawback, product owners have a tendency to fund the new/sexy work while ignoring routine maintenance work. To get around this, some organizations force teams to reserve a piece of the budget for maintenance and paying down technical debt.

    3. Venture-Based Funding

    While not my favorite, venture-based funding is a model a small handful of companies are experimenting with. Just like Silicon Valley-style venture capitalists (VCs), an executive board funds ideas for minimal viable products. Based on the effectiveness of the product, additional funding is granted to the teams.

    The promise of this model is to seed lots of ideas and fund only the ones that work. The benefit is greater transparency and reduced financial risk. The drawback is that most companies are not wired like VC firms. A “sink or swim” culture gives rise to other problems. When viability is all that matters, why should employees follow any of the corporate rules, security policies, best practices or infrastructure requirements, to name a few? And if the idea is good, what prevents the developers to seek out actual seed funding and create a new competitor?

    Changing your budgeting process for DevOps is not an easy undertaking. There are significant risks and short-term disruptions to address as the new process takes hold. But one thing is sure, a DevOps transformation must eventually include a budget transformation as well.

    About The Author / Mustafa Kapadia

    Mustafa-KapadiaMustafa Kapadia is the Service Line Leader for IBM’s DevOps practice, a business advisory practice focused on helping large enterprises transform their software & application delivery. He has over 17+ years of experience in the tech. space, both as a service provider and a management consultant.

    Prior to joining IBM, Mustafa was a management consultant with Deloitte’s Strategy & Operations practice. He lives in San Francisco Bay Area, is an avid blogger (when time permitting), a speaker, and adviser to start ups.

    Connect with Mustafa on LinkedIn | Twitter