How does the digital transformation affect IT budgets?
Working more efficiently and connected is one of the great opportunities of the digital transformation. But whether and in what context technical advancements are used is a question of IT budget planning and investment readiness. In many cases, this is true for medium-sized companies, which can secure market-leading positions with targeted innovations, but often recognize this opportunity very late.
Planning is the most important requirement
Innovations in the IT sector are often triggered once there are already noticeable effects in everyday working life. An outdated software, for example, which reaches its limits and does not offer the desired functions (anymore). As a result of changes in market conditions, adjustments may be necessary, but these cannot be realized with the outdated technology base. Another example is outdated hardware, for which replacement must be purchased quickly.
Ideally, the IT budget is based on well thought-out (annual) planning, which takes into account not only maintenance and updates but also runtimes. This creates the opportunity to specifically develop the IT infrastructure and avoid uncontrollable migration and service costs. Being able to ask questions such as “Are there already systems that we can use to be more efficient?” can be crucial to the company’s success.
Cloud computing is moving the market
In the digital transformation, cloud computing and software as a service (SaaS for short) play a central role. The latter is a software licensing model in which the provider offers its own applications to the user. Customers have the advantage of not having to worry about technical infrastructure, installation or ongoing updates. One of the implications for IT budgets is that no large up-front investments need be made.
SaaS is usually based on a subscription model. Users pay a monthly or annual fee to access them, making it easier to plan for initial and ongoing costs. Another advantage is flexibility, as computing, storage and network resources can be scaled individually and (better) adapted to the needs of the business.
As the cloud market evolves, more and more companies are considering a modern, cloud-based IT infrastructure. For instance, Microsoft is one of the largest providers of cloud-based enterprise management solutions in the SaaS environment and recently released its Microsoft Dynamics 365 Business Central solution.
Investments in automation
Digitization in many industries results in increasing automation and new application scenarios. The focus here is on reducing operating costs and streamlining processes. But also the increasing availability of data sets standards and customers expect more service and transparency. Those who cannot meet these requirements run the risk of being left behind in the market.
Automation is seen as a success factor, according to a recent study by Crisp Research in cooperation with Nexinto and Hewlett Packard Enterprise (HPE) (read here in German). 73 percent of the IT decision makers surveyed said they had achieved an automation level of less than 30 percent in the company so far. They also plan to increase the level of automation in their company to an average of 58 percent by 2020.
The digital transformation is creating systems and networks that help businesses increase their efficiency and save time and money. At the same time, these changes are subject to pressure to innovate, which is playing an increasing role in strategic decisions. Whether and to what extent IT developments contribute to success is, of course, industry- and company-dependent.
Anyone wishing to benefit from new systems and take advantage of change should consider modernizing their IT budgeting, depending on their current approach. Instead of updating the previous year’s figures, a turnaround planning including terms and updates is worthwhile. This is the only way for companies to maintain control over IT budgets and provide long-term scope for smart use of innovation.
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