Immediate, gut reactions to the coronavirus pandemic have waned, allowing businesses room to outline revised spending priorities for 2020 and rethink long-term investments.
For many it's clear: Cash is tight and major investments are to be deferred.
Boiled down, the principal areas are "cost savings in the short term and cost savings in the long term," said Dennis Hodges, CIO of Inteva Products, a global engineered component and systems provider for the automotive industry, speaking in a CIO roundtable webinar this week. The webinar was organized by Peter Steube, managing director at Enterprise Technology Research (ETR).
"We do expect our budget to be tight for the rest of the year," Hodges said.
Short term, Inteva is continuing network migration work from a third-party MPLS to internet-based circuits and using SD-WAN on top of them. Long-term, the focus is on digital transformation, which is driving costs out of operations.
"As a service has saved our SaaS over the last six months," Hodges said.
SaaS is emerging as a clear winner in the crisis, enabling remote work and continued business operations at a scale technologists wouldn't have dreamed of a decade ago.
Demand has already highlighted some technology winners. Webex, Cisco's video conferencing platform, hit a record with 324 million attendees. Microsoft Teams and Slack are each reporting an uptick in users. Even with its privacy woes, Zoom has seen usage skyrocket.
Projects companies long had in the works have become mission critical overnight, with moves from on-premise to cloud-based platforms and rapid tool adoption. For some, that can translate into a sharp increase in OpEx.
Spending is directed at immediate needs for hurting parts of business, Siva S, founder and CEO of LTI-acquired Powerupcloud Technologies, told CIO Dive. Clients may not be able to execute large-scale migrations, but they can pick core applications and migrate to ensure support, reduce spending and shift to a different cost model.
Several CIOs are asking Powerupcloud to help save costs on cloud spend and free up budgets. Some clients are shutting down some R&D to maximize cost savings, S said. "The budget isn't going anywhere. They are spending," but they're rethinking.
An undercurrent of corporate goodwill is running through businesses, as technology providers restructure billing or defer costs for customers. Hewlett Packard Enterprise Financial Services is allocating more than $2 billion to customers with "cash-flow or liquidity issues," the company announced Wednesday.
As part of a payment relief program, HPE will allow customers to acquire technology while paying 1% of the total contract value for the first eight months, the company said. That defers 90% of cost until 2021, when customers would start paying about 3.3% of total contract value each month.
Flexibility from vendors breeds loyalty with customers, regardless of industry or the degree to which finances are clipped. It also creates room for shifts from on-premise systems to software-based solutions with the same provider.
Where the cloud comes in
The health crisis has delineated spending priorities, showing the benefits of cloud and emphasizing the need for a flexible security portfolio.
One large insurance customer had planned to move 3,000 workloads to the cloud, but paused large-scale migration, S said. It instead decided to focus on moving critical applications, which helps alleviate struggles with availability and support needs.
Along the way, it shifts the workloads to a different cost model and reduces spending, he said.
There's an array of reactions to the pandemic and how to ensure business continuity and save cash flow, Charlie Li, EVP and head of application and cloud technologies at consulting company Capgemini, told CIO Dive.
"Head in the sand," about 5-10% of clients have canceled everything they can without financial penalty.
The majority of companies are in between, reducing spend on "keeping the lights on" projects. Existing managed service contracts are reduced or canceled altogether. This allows companies to take savings and push them to the cloud.
The third category is mostly clients who are less impacted or benefiting from the crisis. They're interested in accelerating and taking advantage of the situation to help the business by spending more on innovation.
The pandemic is even eliminating the indecision companies face when confronted with scores of vendors.
Some clients are making simpler decisions, no longer waffling on which is the best cloud vendor for their business, Li said.
The message? Just pick.