How IT Operations Leaders Can Deliver Business Value in

an Economic Slowdown

Executive Summary

In April 2020, 22 million Americans filed for jobless claims, bringing the current US unemployment rate to 18 percent. According to Morgan Stanley, the present economic uncertainty will reduce U.S. GDP growth by 30 percent in the second quarter of 2020 and by 5 percent over the entire year.

Analyst firm Forrester has revised its global technology spending estimates to decline by 9 percent (medium-case scenario) in 2020. The firm expects strong demand for cloud infrastructure services and certain types of communications equipment and collaboration tools that enable remote work. However, hardware refresh cycles, systems integration services, and software could all witness a secular decline, as organizations enforce short-term spending cuts to conserve cash and maintain profitability. IT leaders will need to rethink and readjust their business plans for 2020. This survey tries to understand how IT operations executives will align technology priorities, budgets, and hiring as well as adapt to the new digital challenges and customer expectations needed to succeed in a volatile economic environment.

53%

26%

13%

8%

66% 47% 48%of respondents hold the role of either director or senior director of IT operations.

of IT leaders work for organizations that spend more than $50 million annually on technology budgets.

of these technology executives work at organizations with more than 1,000 employees.

Methodology

A third party surveyed a total of 137 respondents on April 1, 2020. All respondents work at the IT director level or above, across IT/technology operations teams in the United States. Enterprises surveyed have more than 500 employees and spent at least $5 million in annual technology budgets. Here is a quick snapshot of our survey respondents:

Annual Technology Spending (In $ Million)

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$5 Million to $50 Million

$51 Million to $ 200 Million

$201 Million to $500 Million

More than $500 Million

Insight #1

Digital transformation will remain a board and CEO-level imperative in 2020 as organizations scramble to launch relevant products and services during the ‘Great Lockdown.’ With physical interactions grinding to a halt, traditional enterprises will have to raise their game to meet and exceed customer expectations with new digital offerings. IT leaders will need to build high-performance teams and embrace rapid innovation to not only outflank their digital-first competitors but also create exciting new possibilities for growth in a resource-constrained environment.

Speeding Up Digital Transformation

61%

25%

12%

2%

Impact on Digital Transformation Spending Enterprises are Doubling Down on Digital Transformation

COVID-19 has dramatically changed the way we work. IT leaders have had to deal with a huge influx of remote workers who not only require secure access to corporate applications but also need to get their job done without a hitch.

Despite a spending slowdown due to economic uncertainty, 73 percent of IT operations and DevOps leaders expect to either accelerate or maintain their digital transformation initiatives and projects.

Enterprises are investing in a whole slew of collaboration and security tools that support this rapid transition to a remote workforce. The current economic downturn will force businesses to rethink every aspect of their value chain and reprioritize their digital platform investments.

Insight #1 - Speeding Up Digital Transformation

Don’t Know

No Change

Slow Down

Accelerate

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During an Economic Slowdown, Invest in Technology That Delights Your CustomersWhile COVID-19 has brought health concerns and economic worries to the forefront, 58 percent of IT leaders expect to either significantly or moderately increase their overall technology budgets to accelerate digital transformation.

IT is no longer the back office but a key contributor to revenue growth, organizational effectiveness, and customer acquisition and retention. Here are two reasons for IT spending growth in the current economic environment:

• Putting customers front and center. During a period of enforced social isolation, online customer experiences will differentiate digital leaders from laggards. Organizations will invest in technology solutions that make it easier to establish trust, build empathy, and reduce stress across their customer base.

• A permanent transition to remote work? Enterprises are scrambling to figure out the right tools, business processes, and security frameworks that can support the needs of their remote employees. Gartner projects that some portion of corporate staff will continue to work from home for greater flexibility while employers will embrace this development as a cost saving measure.

30%

28%

20%

18%

5%

Insight #1 - Speeding Up Digital Transformation

Expected Changes in Annual Technology Spending

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A Significant Increase

A Moderate Increase

A Significant Decrease

A Moderate Decline

Same as Before

Staying Agile During a DownturnAgile delivery and cloud cost optimization are the most important priorities for technology leaders today, underlining the twin needs for customer-centricity and fiscal discipline. While IT teams are in no mood to slow down, they clearly understand the global economic environment has shifted dramatically since March 2020.

• Betting on Agile and DevOps practices. The current economy will rewardorganizations that can respond quickly to customer demands. Agile andDevOps approaches drive faster release velocity so that organizations canuse rapid customer feedback to improve their products and services.Enterprises that adopt modern development and operational practices canensure robust and reliable deployments, lower failure rates, and fasterrecovery from incidents.

• Optimizing cloud spending. Organizations are currently wasting35 percent of their annual public cloud expenditure. In 2020, FinancialOperations (FinOps) teams will track down redundant, unused, andunderutilized cloud services and turn off these idle cloud resources thatare costing them a ton of money. Organizations will also carefully analyzeworkload requirements and identify the right pricing models (on-demand,spot, and reserved) that can maximize cloud cost savings.

Insight #1 - Speeding Up Digital Transformation

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64%

62%

44%36%

Agile IT Deliveryand DevOps

Cloud CostOptimization

Customer and Market Insights

Business Model Transformation

Technology Initiatives for 2020

During a downturn, IT leaders will need to build a watertight business case so that critical technology investments are not shortchanged. While funding constraints, hiring delays, and project cancellations are inevitable during an economic contraction, technology executives that demonstrate how IT priorities align with new business realities will receive faster budget approvals and greater organizational support. Our survey shows that enterprises are prioritizing technology investments such as cybersecurity, analytics, and public cloud that can deliver tangible business value as well as deploying performance monitoring tools and partnering with managed service providers to deliver optimal user experiences and maintain service resilience.

Insight #2

Technology Priorities for 2020

Renewed Investments in Security and Multi-Cloud InfrastructureThe three biggest areas where IT operations and DevOps teams will increase funding this year include information security and compliance, big data and analytics, and public and multi-cloud infrastructure.

• Cybersecurity. Given the sudden spike in telecommuting, technology leaders have to balance workforce productivity concerns with cybersecurity risks. Enterprise IT teams will invest in identity management, network connectivity, and endpoint security tools that can help prevent phishing scams and minimize security breaches for a largely remote workforce.

• Big Data and analytics. Business and IT executives need to embrace data-driven decision making so that their organizations can react quickly to unexpected opportunities and marketplace shifts. Big data and analytics offer real-time insights into broader economic trends so that organizations can deliver relevant products to match shifts in consumer preferences.

• Cloud infrastructure. Enterprises are turning to scalable cloud services to meet sudden demand spikes and minimize onsite staff at their datacenter facilities. Secure and battle-tested cloud architectures help IT departments maintain the health and quality of services being delivered.

Insight #2 - Technology Priorities for 2020

62%

46%

45%

44%

42%

41%

38%

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Technology Initiatives for 2020

Information Security and Compliance

Big Data and Analytics

Public and Multi-Cloud Infrastructure

IoT and Edge Computing

Remote Work and Collaboration

Datacenters and Private Clouds

Business Continuity and Disaster Recovery

A New Breed of Performance Monitoring Tools Take Center StageReal-time performance monitoring tools help IT operations teams keep tabs on the health of their mission-critical services while enabling rapid detection of performance degradations and technology outages. Enterprises expect to purchase modern incident management, cloud native observability, and network performance monitoring tools for ensuring service availability and delivering compelling user experiences.

• Artificial Intelligence for IT Operations (AIOps). Two-thirds of IT leaders are looking to invest in AIOps tools that combine machine learning and data science techniques for faster incident diagnosis, rapid response, and service restoration.

• Cloud Native Observability. A recent Cloud Native Computing Foundation (CNCF) survey found that 84 percent of respondents are running container workloads in production environments. Cloud native observability tools combine metrics, logs, and traces for managing the health and performance of distributed microservices built on containerized infrastructure.

• Network Performance Monitoring and Diagnostics. With internet traffic surging to record levels in the last few months, IT operations teams have to closely track network performance and bandwidth utilization. Network performance monitoring tools deliver hybrid infrastructure visibility by analyzing historical and real-time network traffic patterns.

Insight #2 - Technology Priorities for 2020

51%

45%

39%

39%

51%

69%Artificial Intelligence for IT Operations (AIOps)

Network Performance Monitoring and Diagnostics

Cloud Native Observability

Digital Experience Monitoring

Hybrid Infrastructure Monitoring

Application Performance Monitoring

Leading Tools for Performance Monitoring

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Managed Service Providers Need to Ramp Up NowGiven the burden of supporting a remote workforce while accelerating digital transformation, IT operations teams will lean more heavily on the expertise of their managed service providers to navigate the new normal. More than 90 percent of technology leaders expect to use managed service providers for the following reasons:

• Technical expertise and knowledge. The OpsRamp Cloud Skills Survey found that 94 percent of IT decision-makers find it somewhat difficult, difficult or very difficult to hire the right technology professionals to manage their hybrid infrastructure. No wonder then, managed service providers are playing a critical role in helping enterprises design, architect, and automate modern workloads.

• Real-time security. Organizations will partner with specialized providers to detect and prevent security threats, ensure security hygiene in line with compliance policies, and enable prompt remediation for security vulnerabilities.

Insight #2 - Technology Priorities for 2020

50%

40%

52%

63%Technical Expertise and Know-How

Enhanced Security

Cost Optimization

Freeing Up Internal Resources

Key Benefits of Working With MSPs

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Why Cloud Infrastructure Remains a Three-Legged RaceWith CFOs expected to question and scrutinize all new capital expenditures, IT leaders will adopt more cloud infrastructure services to gain spending flexibility and tap into on-demand computing power. When we asked IT leaders their preferred public cloud provider, Google Cloud Platform topped the list followed closely by Amazon Web Services and Microsoft Azure (both jointly tied for the second position).

IT executives believe that the gap between the current market leader (AWS) and the next two cloud platforms (Azure and GCP) is narrowing. Technology leaders will invest in cloud providers that can best deliver on their business needs and technology requirements while ensuring compliance with enterprise security policies.

Insight #2 - Technology Priorities for 2020

Google Cloud Platform

Amazon Web Services

Microsoft Azure

IBM Cloud

Oracle Cloud Infrastructure

Alibaba Cloud

46%

26%

61%

60%

60%

20%

Preferred Public Cloud Platform Providers

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IT leaders that align technology spending with clear performance measures will not only be able to demonstrate business value but also ensure their strategic relevance. Organizations can leapfrog their competition with sustainable innovation only when business and technology teams combine a culture of collaboration with operational rigor and excellence. Our report also shows that technology leaders will rope in financial experts who can help them manage a dynamic business environment while paying close attention to the top-line and bottom-line benefits of technology spending.

Insight #3

Delivering Business Value

Time for an Equal PartnershipThe biggest challenge in driving business value is still the old bugbear, IT-business alignment. IT leaders will need to work closely with their business counterparts to prioritize and launch high-impact solutions while proactively managing costs so that their organization can not only survive but thrive in the current economic situation.

• Walk in the shoes of your customers. IT operations teams should not only understand the value proposition of their organization’s products and services but also align with the overall customer journey. IT leaders can only deliver a compelling and differentiated customer experience if they closely work with business owners, developers, product managers, and technology partners. IT operators that make this shift from reactive infrastructure management to proactive delivery of business outcomes will become key enablers of enterprise digital transformation.

• Confronting ‘black swan’ events. With the sudden onset of the COVID-19 pandemic, IT leaders have had to shift their thinking from peacetime performance to wartime operations. Short-term measures might predominate executive decision making that could potentially shortchange the technology investments needed for dealing with an eventual recovery and uptick in customer demand.

Insight #3 - Delivering Business Value

Business-IT Alignment

Economic Uncertainty

Available Technology Solutions

Staff Technology Skills

Biggest Challenges for Operational Transformation

13%

41%

25%

18%

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IT Leaders Will Need to Get More Creative to Contain Costs Given that the next two quarters will require major economic adjustments, cost optimization is top of mind for IT operations leaders. Cost reduction measures under consideration include rolling out self-service technologies so that experienced IT staff can work on high-value activities, doing more business with a select set of technology vendors, and reducing commercial software spend with open source technologies.

• Self-service approaches rule. How do enterprises ensure a high level of customer and employee service without constant support from human operators? Self-service technologies such as chatbots, content localization, and interactive voice response deliver intelligent assistance, personalized service, and multi-channel interactions in a scalable manner.

• Vendor consolidation is inevitable. According to Okta, enterprises have deployed 190 software applications in their organization, an increase of 47 percent over 2019. While the diversity of enterprise software is at an all-time high, IT leaders will do business with strategic technology vendors that can help eliminate tool sprawl and enforce spending discipline across business units. Vendor consolidation will deliver greater purchasing power in terms of cost savings, flexible payment terms, and faster responsiveness to business needs.

• Why open source keeps winning. A Cambrian explosion of open source innovation has reshaped every aspect of the enterprise application and infrastructure stack. Enterprises will replace closed source enterprise software with open source tools that offer a lower total cost of ownership, greater operational flexibility, better interoperability, and faster developer velocity.

Insight #3 - Delivering Business Value

Investing in Self-Service Technologies

Consolidation of TechnologyVendors

Reliance on Managed Service Providers

Adoption of Open Source Technologies

Efficient Infrastructure Utilization

Delaying All Non-Essential Hiring

Cost Cutting Measures and Programs

50%

60%

59%

58%

45%

32%

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Financial Expertise: A Rare Commodity in IT Cost optimization is front and center for IT operations teams. Financial analysts that can build relevant models and deliver strategic insights to aid decision mak-ing are in huge demand. Enterprises apparently can’t hire enough cloud architects and DevOps engineers which explains why site reliability engineers are making $135,000 per year.

• IT Finance. The most important hire for two-thirds of respondents is financial analysts who can clearly communicate the business value of technology investments while aligning IT spending with corporate goals. These professionals partner with IT executives to create annual technology budgets and translate business objectives into clear performance indicators for IT operations teams.

• Cloud and DevOps. Cloud architects and DevOps engineers are the other critical technology roles that enterprises expect to keep hiring. People in these roles need to keep up with the demands of modern distributed systems by designing and managing scalable infrastructure that can deliver amazing customer experiences.

Insight #3 - Delivering Business Value

Technology Roles Still In Demand

IT Finance

Cloud Architects

DevOps/Site Reliability Engineers

Data Scientists

Product Managers

47%

68%

53%

50%

32%

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Conclusion Here are three key takeaways from the ‘Thriving in the New Normal’ report for enterprise IT teams to consider as they deal with the operational, organizational, and economic impact of the global health crisis we’re facing today:

Freezing critical IT spending might put you out of business

While IT leaders will strive to conserve cash, they are not slowing down on digital transformation. Digital products and services can help firms cope with an unprecedented slowdown, build a foundation of customer trust, and ensure customer loyalty (and higher profitability) when things get back to normal. 73 percent of IT operations leaders are either accelerating or maintaining their digital business spending so that their organizations can grow revenues, experiment with new business models, and stay ahead of the competition.

Performance monitoring can make or break customer experiences

IT operations teams have to monitor the health and performance of legacy and modern services, which can involve a heady mix of monoliths and microservices as well as physical, virtual, multi-cloud, containerized, and serverless infrastructure. Given the complex nature of managing distributed infrastructure along with the challenges of collaborating with a largely remote workforce, 69 percent of IT heads are turning to AIOps tools to minimize digital service outages, break down organizational silos, and reduce manual operations.

Deliver business value and align with business partners on outcomes

If IT operations departments are primarily perceived as cost centers that soak up valuable resources, they are at the risk of facing severe budget cuts (or even losing their jobs). In this difficult time, IT leaders will need to demonstrate how their work has a transformative impact on business goals. 68 percent of executives in our survey plan to hire IT financial analysts to showcase how IT operations teams are positively influencing organizational objectives such as growth, profitability, risk, cost savings, and time-to-market.

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