Digital dichotomy: Outcomes and innovation help budgets beat macroeconomics

Traditional IT budgets are under pressure from the current macroeconomic environment (see Exhibit 1). But the push to innovate, improve efficiency, increase speed to market, and drive down costs has not vanished. Business leaders and their operation technology colleagues remain open to investing to drive value and improve their customers’ experiences—but to justify that investment, for most decision makers, the outcomes on offer must be clearer.

During a C-suite Fireside Chat at the HFS Horizons summit in London, to get a perspective on what the discussion dubbed the “Digital Dichotomy,” Phil Fersht, CEO and Chief Analyst at HFS Research, sat down with Kalyan Kumar (KK), Chief Technology Officer at HCL Technologies and Chief Product Officer at HCL Software. KK confirmed the pandemic had become a driver for digital transformation, acting as “the number one transformation agent we never saw coming.” COVID transformed many technologies from cautious dabbling to the forefront of enterprise investment plans, like cloud and complementary technologies like automation, analytics, and AI. Cloud, for example, has become an essential technology allowing more of us to work and access data from anywhere. Similarly, business leaders are looking for the value and innovation potential brought on by the more recent challenging macroeconomic headwinds like inflation, financial markets, supply chain resilience, sustainability, and much more—but they are attempting to balance that with the associated budget constraints.

Exhibit 1: IT budgets are tightening as macroeconomic concerns take hold

Sample: 602 Enterprises (2022) and 600 Enterprises (2023)
Source: HFS Pulse, 2022 and 2023

Leaders’ roles and responsibilities are shifting to a distributed model

KK also outlined that technology is no longer the CIO’s agenda. Technology is at the core of every business line, including finance, procurement, and core operations, and that shift has driven more to distributed technology-influenced roles and decisions. For example, KK mused on a role beginning to find its limitations:

The Chief Digital Officer role has fizzled out a bit. It’s now about being embedded or ‘native’.

– Kalyan Kumar (KK), Chief Technology Officer at HCL Technologies and Chief Product Officer, HCL Software

The same responsibility distribution needs to happen in any transformation. Every company has to think of technology as a business value and outcome enabler and move from a centralized to a distributed model.

The Bottom Line: Business and technology colleagues are still willing to invest if they see value, outcomes, and innovation.

Technology decision-making attitudes are evolving.
Here are our three key takeaways from Phil and KK’s conversation on the digital dichotomy discussion:

• Business and technology decision makers are still willing to spend. While traditional IT budgets are undoubtedly constrained, many enterprise leaders remain eager to spend and show excitement for the potential held by technology.
• Technology leaders must still improve their understanding of the business. Technology leaders can continue to build bridges with their business-line peers. That business-technology relationship and understanding will help simplify and improve business processes by better leveraging new and existing technologies.
• Stay curious about learning new things: Business leaders increasingly understand technology well and have an open mind. Everyone in an organization can adopt, as KK put it, “a philosophy of being curious to learn, unlearn, relearn, and adopt new things.”