The adoption of AI and IoT is on the rise, as many organizations increasingly realize the business benefits of the technologies. However, as these technologies move into the mainstream, companies will struggle to quantify their value over time as their IT finance systems aren’t set up for this. In 2020, the ability to calculate long-term ROI from technologies with costs that aren’t fixed will be increasingly important for CIOs and CTOs looking to justify their technology investments.
IoT, for instance, will widen the cost base for the IT team as smart devices proliferate. While this may reduce other costs, such as labor, over time smart devices are likely to become another layer of legacy technology. This makes it hard to assess the total cost of ownership without having dedicated tools for doing so. Similarly, AI will produce fast results in the short term, cutting down laborious manual processes, but its value is harder to quantify over time. For both of these technologies, as with other emerging innovations, CIOs and CTOs will need to have a defensible strategy for proving their value in order to align with the needs of the business while balancing their budgets.
IT roles will demand broader skillsets
The past 10 years have seen many new roles crop up in IT (CDO, Head of Cloud Excellence, TBM Manager, etc.) that weren’t conceived of the decade before. The pace of change in technology means this is only set to continue, and as a result there will need to be a concurrent improvement in both hard skills (such as AI development skills) and soft skills (to manage IT’s relationship with the rest of the business).
While individual business units will be the ones driving forward with new technologies in order to pursue innovation, the CIO and the expanding IT team will now be the ones to ensure those demands align with overall business needs. This shift in scope of work – and the greater level of responsibility it entails – means that IT professionals need to upskill in order to meet the new demands of the role.
Cloud providers will specialize, and business will count the cost
As seen in other software industries, overly aggressive price wars would likely upset the cloud market. As a result, AWS, Azure, and GCP will all continue to enhance their specialities in 2020 (for instance focusing on scale, or a specific sector, or AI capabilities) to provide differentiation.
This will have a knock-on effect on costs. Apples to apples comparisons of pricings are already difficult but moving forward businesses will have to do a much better job of tying value to cloud to make the right decisions for their business needs. Cloud services constantly scale to meet demand, which increases cost – but how do you compare providers or services with one another? How do you know the exact value you’re getting for your money?
To combat this uncertainty, in 2020 companies will need to establish a cloud center of excellence and a “FinOps” mindset, whereby all areas of the business have greater understanding of, and accountability for, cloud spend. Currently, most IT functions don’t have the right set-up to manage cloud spend, with disparate instances of “Google here” and “AWS there.” This needs to change as organizations mature their cloud strategy and should start with the development of a central company IT strategy.
IT finance management will need to change for agile to work
Agile is becoming an increasingly popular way for forward-thinking IT teams to work, but IT finance systems aren’t set up to properly assess costs and business value. As the way companies work moves from a waterfall methodology to an agile one, it’s not just the IT finance team that needs to change to keep up, it’s also management of the organization in general.
Product development has shifted, with multiple iterative trials now taking place for each incremental improvement. It’s imperative that the rest of the business also change to align with this shift, particularly the CFO. The CFO needs to ensure that the organization’s capital is spent wisely and in the right areas to support both the short- and long- term goals of the organization.
The office of the CFO needs to introduce governance and controls that don’t hinder and slow down the benefits of agile but provide a helicopter perspective across all of the organization’s investments. This will ensure that the team’s efforts are supporting the business’ short- and long-term plans, as agile takes center stage and becomes the accepted way of working.
It’s an exciting time. What remains to be seen is which businesses will adapt their structure along with the times, and which will fall by the wayside as they let their eagerness to accelerate overtake the pragmatic need to properly manage the side effects of innovation. I’m looking forward to seeing who the winners are.