by Sharon Florentine

Top IT spending priorities for 2020

Feb 07, 2020
BudgetingIT LeadershipIT Strategy

From data analytics to cybersecurity to customer experience, here's where CIOs will direct their IT budgets this year.

leading fistful of dollars budgets money
Credit: Thinkstock

The CIO role has become a transformational one. Forty-six percent of IT leaders say their work is primarily focused on transforming the business, according to our 2020 State of the CIO survey.

But the new decade also sees CIOs taking on strategic responsibilities in a wide range of endeavors, requiring them to strike a difficult balance between business innovation and operational excellence. In fact, 58 percent of IT leaders surveyed for the 2020 State of the CIO see their CIO role becoming a business strategist position in the next three to five years.

How they expect to advance the business and keep IT assets humming can be gleaned in part by where they spend their budget, and this year, IT budgets are increasing, says John McKnight, executive vice president of research and analyst services at Enterprise Strategy Group.

“CIOs tell us that 56 percent of enterprises expect to increase IT spending in 2020,” McKnight says. “[Around] 40 percent will keep their budgets flat and [around] 5 percent plan to cut spending. Overall, we see enterprises expecting modest YoY budget growth from 2019 to 2020 with an estimated mean annual spending change of plus 3.2 percent.”

For most organizations, cybersecurity is of prominent importance, and that’s where they are focusing significant portions of their IT budgets, he says.

“Strengthening cybersecurity is the No. 1 business initiative that will drive technology spending in 2020,” McKnight says. Other key areas are using data analytics for real-time insights and improving customer experience, he adds. These three trends will have significant impact on CIO leadership in 2020 and beyond.

Here, we take a look at the business priorities driving IT investments this year and discuss with several CIOs the areas they’ll be investing in to bring 2020’s business initiatives to fruition, and where they see other CIOs needing to place their budget bets.

Top 12 IT budget priorities

The three main business drivers for IT budgets this year are increasing operational efficiency, cited by 37 percent of State of the CIO survey respondents, improving customer experience (35%) and increasing cybersecurity protections (33%).

As part of ongoing modernization efforts, CIOs are also earmarking IT budget to help transform business processes (30%) and improve employee productivity (21%). CIOs are also taking aim at the bottom line, with 24 percent of CIOs devoting IT spend to improving profitability, 19 percent to increasing topline revenue,  and 15 percent to introducing new digital revenue streams.

To fulfill these mandates, CIOs report the following technology initiatives as driving the most IT investment at their organizations this year:

  1. Data/business analytics: 37%
  2. Security/risk management: 34%
  3. Customer experience (chatbots, mobile apps, etc.): 28%
  4. Machine learning/AI/RPA: 24%
  5. Application/legacy systems modernization: 23%
  6. Collaboration tools: 21%
  7. Cloud (non-SaaS): 20%
  8. SaaS migrations: 19%
  9. Infrastructure consolidation/virtualization: 18%
  10. Business process management: 18%
  11. Agile/DevOps/DevSecOps processes: 18%
  12. Data center/infrastructure: 18%

Doubling down on customers

For Citrix CIO Meerah Rajavel, 2020 will see a greater need for CIOs to better manage the pressure for increased efficiency, cost reduction and innovation.

“In my opinion, this is the place IT needs to practice what we preach and leverage modern technologies like AI/ML, analytics, etc., to automate IT tasks and become a data-driven organization,” she says. “Every CIO is a P&L owner, and if you run IT like the business with budget as your ‘L’ and your value contribution to top-line and bottom-line as a ‘P,’ your discussion with the CEO, CFO, and board will be very different.”

Customer engagement is a major 2020 priority for Rajavel’s IT department at Citrix.

“As we move to a SaaS model, my priority is aligning our digital/IT capabilities to support the transition with greater customer engagement. We also have focused initiatives on operational excellence. As a company, we are focused on helping our customers deliver a superior employee experience that drives engagement and productivity,” she says. “And we are doubling down on delivering solutions that enable companies to provide secure and reliable access to the applications and insights their employees need and prefer to use to perform at their best.”

Emphasizing employee engagement

Customer and employee experience is also a priority for Barry Shurkey, CIO of NTT DATA Services.

“We want to increase the productivity of our 50,000 NTT DATA Services’ employees while simplifying, stabilizing, modernizing and securing the corporate IT portfolio,” he says.

For Shurkey, doing so is a question of transforming culture — and of metrics.

“You have to instill these priorities into your team, they can’t just be yours. So, it’s important to know how to make these priorities relatable to each and every employee, so they can make an impact,” he says. “It’s important to have a great partnership with our business units and communicate how you are doing as you progress through the year so everyone stays engaged, and make sure your company or business area has metrics for each of your priorities.”

That means keeping track of KPIs and metrics to track improvement and help illustrate where budget should be shifted to address changing needs.

“Tracking before and after metrics with implementation requires educating teams on what areas are and are not important to measure. By providing a clear but holistic picture of progress from beginning to end with insights on where and how the work is done, CIOs can make informed requests for budget expansion knowing where the funds will be allocated,” he says.

Driving value with data

James McGlennon, executive vice president and CIO of Liberty Mutual Insurance Group, says he and his executive team have developed a 2020 strategy to support the company’s drive to becoming a top-three property and casualty insurer.

For Liberty Mutual, that means ensuring “every deliverable our technology teams produce ladders up to creating business value. This shared vision gives every technology employee a clear understanding of where we’re headed and how they’re contributing to our success,” McGlennon says.

To those ends, McGlennon’s overall IT budget has increased to help with technical debt and to account for additional investments in areas such as data science and machine learning. Strengthening Liberty Mutual’s security posture, migrating workloads to the cloud, building skills for the future, optimizing costs and gaining more insight into existing data are also major priorities for Liberty Mutual’s IT teams, he says.

“Several years ago, we made the commitment to move our tech platforms out of our own data centers and onto the public cloud. Migrating to the cloud gives us the velocity we need to get working software in the hands of end-users faster,” he says. “We’re helping employees understand the types of skills they’ll need going forward and we’re providing them with a broad range of resources to help them get to the role of the future. We are constantly working to grow our understanding of costs to make better investment decisions.”

This effort includes leveraging financial tools that help provide the transparency necessary for effective planning and discussions with partners.

“Using data analytics, we are growing our insight into the true cost of our applications. Tracking the health and age of our applications yields real-time analytics to inform investment decisions and get more for every dollar,” he says. “We know that data is what’s going to fuel our ability to compete and to delight our customers on a day-to-day basis, so we’re always looking to gain more insight into the data we have and how that will deliver value and drive improved customer outcomes journeys.”

Focusing on cybersecurity

Like many IT executives today, Mike Krza, COO of colocation services at Flexential, is concerned about cybersecurity and regulatory compliance.

“As we see more cyberattacks and additional regulations every year, CIOs are worried about data protection and security. They also want to make sure they are secure 24/7 and can grow effectively,” Krza says.

He adds that he sees many IT leaders looking for ways to establish more control over their costs and to project costs more accurately into the future.

“We see partners ‘boomerang’ back from the public cloud to hybrid IT, because of unexpected costs or changing needs,” he says. “We also see customers going from multiple sites to one consolidated location using colocation, cloud and public cloud access to manage their workloads.”

For 2020, Krza says Flexential will focus on IT complexity and distributed workloads. Helping customers identify trends, remain secure and acquire the skills necessary to thrive in the future are key initiatives.

“Roles have expanded as IT environments are changing rapidly. The technology for IT is becoming more complex and workloads are getting larger and more distributed. With everything-as-a-service, you need to know more and manage more. To survive in these highly dynamic hybrid IT environments your business really needs to be flexible and able to adapt quickly,” he says.