With the rise of telework and new ways of working for businesses, enterprise CIOs are rapidly accelerating their digital transformation investments, enabling faster recovery for global IT service companies.
More than 70% of the CIOs today, significantly focusing on accelerating their digital spending and drifting away from capital expenditure to operating expenditure, according to a recent report titled, Future of Technology Services — Navigating the New Normal, by the National Association of Software and Services Companies (NASSCOM).
While most companies are adapting to the new normal, CIOs are under relentless pressure to make their organizations competitive and improve speed to market. (See: How is digital transformation shaping the new future? and CIOs to focus on network transformation for business continuity)
The rapid transformation route toward digital transformation has heightened the adoption of cloud, artificial intelligence, automation, and analytics. The increased adoption of cloud workloads by enterprises has unfurled the need to modernize architectures with a sharp focus on even the most trivial user requirement. All this has provided an enormous opportunity for IT Services companies to address these challenges by delivering high-set engineering solutions to make the organizations productive and agile. (See: AI-driven analytics is CIOs’ mantra in the new normal)
Since most organizations have already issued a remote work order for an unpredictable future and the COVID-19 vaccine is not yet available, CIOs will continue to anchor digital transformation initiatives. (See: Tech majors extend work-from-home to keep pandemic at bay)
A huge growth opportunity
According to Nasscom, digital transformation deals have seen a 30 percent jump since the pandemic begins, cloud spending an astonishing 80 percent, and customer experience 15 percent. “With enterprises and CIOs rebalancing technology spend to prioritize digitization, major technology services players have reported better results than analyst expectations in the first and second quarter of FY2021. This is an indication that the global technology services industry may also be well on its way to early recovery,” the Nasscom study expounds.
What Nasscom observes is not surprising. Many industry observers have recently expressed optimism about the expected growth of the IT services market due to improved market sentiment in the US and Europe. In October of this year, the global rating agency Fitch forecasted upward revenue trends in the IT services industry in 2021-2022. (See: Growth of Indian IT sector set for revival in 2021)
Earlier this year, panic resulted in chaos at the onset of the pandemic. There was no way to predict how long it would take to recover. However, our discussions with CIOs and IT leaders have shown that digital technologies’ adoption is the only way companies can remain resilient and overcome disruptions. (See: Technology trends for businesses in 2020)
CIOs’ digital transformation efforts are aligned with the understanding that every aspect – from service delivery models to talent acquisition and risk management strategies – must be revisited and integrated with the new priorities of their clients.
IT Services firms are also aggressively enhancing their focus on providing smarter, practical solutions to construct agile, integrated, simplified, and more intelligent IT environments for their customers. This has also paved the way for rapid consolidation and acquisition in the digital transformation space, which is expected to continue in the near future. (See: Tech Cos take M&A route for digital transformation supremacy)
The challenge, however, for CIOs of small and medium businesses will largely remain around IT budgets. They will need to rationalize return on investment (ROI) and determine what technology is best suited to their needs.