Technology | Media | Telecommunications

Monday, October 26, 2020

Why More Board of Directors Invest in Digital Business

While many organizations are concerned about cash flow and other financial metrics, given the current economic environment, the most forward-looking leaders plan further investments in strategic Digital Transformation projects. 

Sixty-nine percent of enterprise boards of directors (BoDs) accelerated their digital business initiatives in the wake of the COVID-19 pandemic disruption, according to the latest market study by Gartner. Almost half anticipate changing their organizations’ traditional business model as a result of the pandemic.

The '2021 Gartner Board of Directors Survey' was aimed to understand how boards of directors view digital business model evolution in their enterprises, along with the role of the CIO and other executive leaders, specifically in the context of responding to the current economic crisis.

Digital Business Market Development

"BoDs play a strong role in helping the executive leadership team focus beyond the short-term risks associated with this extended pandemic," said Partha Iyengar, vice president at Gartner. "Technology-driven digital transformation can, and should be, a strong enabler in addressing employee, customer, supply chain and broad brand impact to position the enterprise to come out of the crisis stronger."

The majority of BoDs (67 percent) expect budgetary increases in information technology (IT) as a result of the pandemic, while functional areas such as marketing and HR are expected to experience some budgetary cuts.

BoD survey respondents expect a nearly 7 percent increase in their IT budgets. "The long-term ask of BoDs during COVID-19 is to approve forward-looking investments even in the face of potentially plummeting revenue and profits," said Mr. Iyengar.

Big data analytics and artificial intelligence (AI) are expected to emerge stronger as game-changer technologies as a result of the pandemic, as enterprises lean on them to drive better decision making in the new remote-work-first environment.

According to the Gartner assessment, digital technology initiatives will serve as the top strategic business priority for enterprise BoDs over the next two years, followed by customer engagement and managing the remote workforce.

Eighty-six percent of respondents deem business technology as having a transformational role in addressing strategic priorities, which is why many organizations are expected to create a new 'Chief Digital Officer' role to respond to COVID-19 in the near-term and drive digital growth in the long-term.

"BoDs must take innovative approaches to their governance models by leveraging technologies and IT expertise to accommodate the impacts that the pandemic is thrusting upon their digital transformation agendas," said Mr. Iyengar.

Almost all enterprise BoDs expect functional leaders to collaborate with one another during COVID-19. More than half believe that CIOs serve as partners with senior business leaders, while over a third look to the CIO to lead digital business issues alone.

Outlook for Digital Business Innovation Investment

Longer-term renewal is an important focus area for the Board, with 28 percent of survey respondents focusing on the 'Renew' phase of The Reset. Executive management is less focused on renewal (18 percent) and more focused on the 'Respond' phase, with just under half reporting it being their core focus area.

"CIOs and the rest of the executive management team should engage with the BoD on creating a longer-term strategy for revival -- and even survival -- post-crisis," concluded Mr. Iyengar.

In summary, I believe that IT 'cost optimization' is a proven way to regain budget funds by re-engineering sub-optimal enterprise communication services that are based upon high-cost networking technology -- such as outdated MPLS infrastructure.

The adoption of SD-WAN solutions can cut those OPEX costs by half and free-up funds to be applied to more strategic IT priorities. Moreover, this transition will significantly increase bandwidth to branch locations and typically improve the end-user experience in a meaningful way.

And, savvy CIOs and CTOs are already working with IT vendors to help them develop a compelling business case that enables this essential transition. It's the first key step in the planning process, before issuing incremental new IT budget requests.