Adjusting Tech Budget To Survive Post 2020
With today’s pandemic, the old blueprint for how CIOs will navigate the tech budget in difficult times won’t function. While CIO insights and their business partners are under extreme pressure to reduce tech budgets, during this crisis, technology plays a vital role in business survival and growth.
Every IT manager must ensure that it is an accurate representation of company priorities, technological requirements, and economic realities when planning a department tech budget. During this epidemic, several smartphone applications have made our lives much easier under house arrest. On-demand application development & amp, food apps, entertainment apps, and digital payment apps have skyrocketed during the turmoil as people are not allowed to leave their homes.
IT managers must also be prepared to clarify and justify the budget before presenting the budget for consideration, sponsorship, and approval, to ensure that all cost problems are clearly defined and reasonable service standards are set.
Corporate goals can not always be obvious, and if you are not positive, inquire. In the course of projects and support tasks, you can interview managers, perform surveys, or take advantage of staff observations made. If you do not have a clear understanding of business needs and goals, it will be difficult, if not impossible, to make difficult budget decisions.
Since the economic crisis, the coronavirus and attempts to control its risks have caused the deepest recession. Many businesses face the possibility of their 2020 profits dropping by 10% to 25% from 2019 levels, with some experiencing catastrophic sales drops of 30 % to 60% or even higher.
However, to meet the demands of the pandemic, these same businesses must retain, if not raise, their technology spending on vital capabilities such as security, risk management, customer service, online trading, delivery of the products, employee engagement, and home-work arrangements.
1. Survival-mode businesses would need to reduce their tech budget by 30 percent or more. This would mean reducing spending on new hardware instead of certain measures that are vital for company survival and vendor management and cutting the new project budget.
Such businesses can also include layoffs of important technology employees. They need to look at their software maintenance contracts, software-as-a-service subscriptions, engineering outsourcing, and telecoms contracts.
2. Adaptive-mode businesses would need to slash the tech budget by 10% to 20%. The main goals will be rationalization and delays. Accelerating the transition to the cloud will help minimize spending on hardware and remove maintenance costs for old on-site applications.
It would be beneficial to drop obsolete or underused applications and delay major projects with longer-term payoffs. It can also make sense to use workers to conduct tasks performed by businesses or outsourcers of technology services.
3. Growth-mode businesses need to economize when investing in growth and helping key suppliers. This climate will tempt companies with strong revenues and balance sheets to beat discount vendors — but they should not. Yes, to close new deals, collaborate with suppliers greedy for every organization that lowers their fees. But for price breaks, don’t rely on current suppliers, which could cost credibility and potential support and might even push them out of business.
Firms can be divided into 3 categories after the state has been created. The interventions recommended would depend on increasing the group the business is in.
State 1: Survivorship
Companies are still experiencing a decline in revenue in this situation and are having trouble managing regular operations. These businesses would need to reduce their technology budget by approximately 30 percent in this situation. Of course, this would depend on each company’s particular situation, it is necessary to emphasize that this is an approximation, and without sufficient previous analysis, no action can be taken in any case.
State 2: Evolutionary
In this case, we are talking about businesses that have been slightly impacted and have had only mild issues, or also slightly gained from the case. The advice, in this case, is to reduce costs by between 10 % and 20%.
State 3: Development
Not all businesses are affected by the current situation, and certain businesses are also benefiting from it. In this scenario, to sustain and increase the growth rate, it is advisable to choose the best products and services, providers.
Determining the priorities of the project to reduce the Tech Budget
It is suggested to use a methodology developed in 1970 by Peter Pyhr for Texas Instrument to decide which projects should be prioritized, and which projects should be suspended or scrapped from our entire current portfolio. In planning or the course of implementation, this approach involves reevaluating each of the projects. We would be able to change the budget and mitigate negative consequences by doing so.
Firstly, we need to put all programs on hold and bring down spending to zero. After that, for each of the programs, we can determine the budget and build a decision process. Mandatory, transformation, differentiation, development, and enhancement programs should be included in the traditional decision process.
One of the key virtues of this strategy is that it is not important to explain why projects have been stopped at this point. We then move on to the next level of study, which is to explain why certain projects should be revived or others should be initiated.
There are projects we can’t pause or cancel. Usually, they are related to legal duties, compliance with legislation, or quality requirements.
Projects for Transformations
These types of initiatives must be related to the strategy of the business and concentrate on developing the organization’s potential core competitive advantages.
Projects Key Distinction
For the company, these are critical ventures related to the added value provided by the company that allows it to remain in the market.
Projects for Development
Some ventures concentrate on increasing existing lines of business.
Projects of Progress
These programs seek to provide the company with organizational or capital efficiencies. Projects for repair or general enhancement are also included.
It is often a challenging job to change the tech budget of an organization. Several variables must be considered, but I have concentrated on two basic factors in this report – the current state of the business and the portfolio of projects.
Surely, users will be able to decide-projects are appropriate for your organization and ensure your company’s survival and positive evolution.