Originally Posted by The Wall Street Journal – via wsj.com – December 23, 2020
Rapid tech deployments during the pandemic have acted as a proof-of-concept for a range of digital projects.
The shaky economy would normally have corporate technology leaders facing an uphill battle to increase information-technology budgets in the year ahead.
But many say Covid-19 has provided a strong case for more spending.
The race to deploy remote-work and business-continuity software as the coronavirus spread has acted as a proof-of-concept for a range of digital projects, such as a broader shift to cloud computing, automation and data analytics. That is helping tech executives bolster the case to invest in these and other advanced tools, including artificial intelligence, chief information officers and other IT officials say.
“Initially that would have been a hard sell,” said Maya Leibman, CIO and executive vice president of American Airlines Group Inc. “But now we can put our head up a bit more and recognize that if you’re not always planning for the future in technology, you’re going to get left behind,” she said.
Ms. Leibman was one of 45 IT executives who responded via email to CIO Journal’s annual end-of-year questionnaire on technology spending forecasts and other issues.
Cathy Bessant, chief operations and technology officer at Bank of America Corp., said the bank plans to spend roughly $3.4 billion on new tech initiatives next year, a single-year high. The bank will spend $10 billion overall on technology next year.
“We feel that it’s important to double down on technology investment in times like these,” said Ms. Bessant, citing new spending on digital channels to boost client services, among other outlays.
Tata Consultancy Services Ltd. , India’s largest software exporter by revenue, plans to target new spending in emerging areas like cloud-delivery models, contactless operations, digital collaboration and analytics, said vice president and CIO Abhijit Mazumder.
“The pandemic allowed us to justify the business case,” Mr. Mazumder said. “As long as we can define a business case, it’s not a challenge to bring in more technology investments.”
Global IT spending is expected to reach just under $3.7 trillion next year, up 4.3% from 2020, according to estimates by enterprise-technology research and consulting firm Gartner Inc. Within total spending, investment in cloud-based IT infrastructure—a key tool that has kept many businesses running during the crisis—is forecast to surge 27.6%, to $64.3 billion in 2021, Gartner said.
Nearly 70% of corporate boards cited the impact of Covid-19 for an increase in spending on IT and digital capabilities, a Gartner analysis from September found.
On top of software’s role in operating companies from afar, it has also proved its worth in helping some firms tackle an unexpected surge in online business from stay-at-home customers.
Etsy Inc. completed a two-year migration to Google Cloud less than a month before Covid-19 reached the U.S., said Mike Fisher, the online marketplace’s chief technology officer. The move enabled the company to shift 5.5 petabytes of data into the cloud, from roughly 2,000 data-center servers, he said.
Within weeks of the outbreak, the site was flooded with online shoppers looking for handmade face masks. “We were fully operational in the cloud and able to scale up in a matter of hours,” Mr. Fisher said. Without investing in cloud infrastructure, he added, “it’s hard to imagine how we could have met the demand.”
Mike McNamara, CIO of Target Corp., said spending on e-commerce platforms for digital and fulfillment services, while building up its engineering team, enabled the retail giant to “weather the storm.”
Other companies are taking a wait-and-see approach to tech spending, after redrawing IT strategies to cope with rapidly changing markets.
“It’s understandable that when economic conditions get tight, businesses look to reduce their costs,” said Jacqui Guichelaar, group CIO at Cisco Systems Inc. She said companies need to be strategic about investing in technology, targeting capabilities that can help push the business forward.
Brian Fox, co-founder and chief technology officer at software developer Sonatype Inc., said uncertainties around the Covid-19 vaccine rollout, or the economic recession, can make long-term spending plans risky.
“If 2020 taught our business anything at all, it’s forced us to become even more conservative in our decision-making processes and not plan things so far out,” Mr. Fox said.
Corrections & Amplifications
Bank of America Corp. plans to spend a total of $10 billion on technology in 2021, including $3.4 billion on new technology initiatives. An earlier version of this story incorrectly said the bank’s spending on technology is $3.4 billion. (Corrected on Dec. 29)