PwC asked more than one hundred and fifty Chief Information Officers (CIOs) and Chief Digital Officers (CDOs) throughout Europe about the impact of the corona crisis. This COVID-19 CIO Pulse Survey provides insights into some of the challenges and priorities that this specific group faces.
Of the technology leaders surveyed, over 70 percent say that the coronavirus outbreak has had a substantial impact on their business, but only 41 percent say that reducing IT costs is a priority. Respondents report being extremely satisfied with their basic IT services - IT4IT - but also indicate that they are still highly concerned. According to PwC's Technology Consulting leader Ragnar van der Valk, it’s now time for companies and organisations to shift the focus from survival mode to accelerating real digital transformation.
Previous research conducted by PwC shows that in addition to CIOs and CDOs, more than 70 percent of CFOs also indicate that COVID-19 has had a significant impact on their business. Van der Valk: "Apparently CIOs and CDOs are securely embedded within their organisations and administrative layers. But it’s also important to mention that they see technology as a means of getting out of this crisis and supporting the transformation potential of the business. Think of the transition from offline to online sales, from multiple business trips to online meetings, and a greater focus on the use of data and data analysis."
The above picture doesn’t differ significantly when you compare the various countries where the survey was conducted. Van der Valk: "The difference isn’t between countries, but within different industries. For example, in the consumer products sector, 92 percent say the impact of COVID-19 is significant, whilst only 20 percent of respondents in the technology, media, and telecom sectors experience it that way.”
Cost reduction is understandably one of the main responses to the impact of COVID-19 on organisations, although it is not widely grasped. Van der Valk: "Of the CIOs and CDOs surveyed, 41 percent say that they see the reduction of IT costs as a priority in response to the corona crisis. I don't think this is such a high percentage when you consider that more than seventy percent see the impact of COVID-19 as significant. Furthermore, of the CIOs who see cost savings as a priority, an overwhelming majority (75 percent) say that they expect to save up to 20 percent on IT costs, of which only 24 percent plan to do this via deferring IT investments.”
Edgar Simons, Director Strategy&: “That 20 percent is relatively small and is easy to achieve in the short term, by halting IT projects and letting external employees go. The big question, however, is whether organisations will remain “fit for growth” in the future. In other words, are they really implementing strategic cost reductions, or are they only operating with a short-term lens?”
IT investments can be broadly classified into a run-portfolio, a grow-portfolio and a transform-portfolio. The first investment portfolio concerns the infrastructure that keeps everything running and the associated safety requirements in a broad sense. Investments in the grow-portfolio are about making processes more efficient and effective and about technology that enables a quick “go-to-market” strategy. The last group, the transform- portfolio, concerns differentiation in the marketplace and gaining a competitive advantage.
"You can see that if technology leaders now save on IT costs, then the chances of this happening within the grow-portfolio are greatest", says Ghelmer Brilleman, Director Technology Consulting PwC. "This relates, for example, to the termination of ERP projects or the technological implementation of HR projects. The run-portfolio remains free from cost savings, because it’s about keeping your business running smoothly, for example, working from home, online meetings and cyber security. I really want to emphasise that cyber security is now even more important than it already was. This is also evident from our research."
According to Ragnar van der Valk, the technology leaders surveyed sometimes place high priority on their IT infrastructure. "We say: if the basics are in order and everyone can work from home, then it's time to shift the focus to the things that will benefit the business. In other words, companies and organisations can shift away from survival mode and then really make an impact. This means investing in the transform segment. Think of all those companies that have now accelerated the pace to online models and switched to vertical and horizontal integration along the value chain. As a core skill, data and data analysis are an important foundation. CIOs and CDOs have become important spokespeople. They need to ensure that they keep their seats in the boardroom, by acting as business partners who ensure that those new digital business models are well supported."
The grow portfolio appears to have to pay the price. However, this seems to be a short-term measure and should only apply to 2020. In the COVID-19 CIO Pulse Survey, this question was repeated for 2021. Van der Valk: “In the investment agenda of 2021 you see that, for example, cyber security and CX (customer experience - Ed.) are still important; however, the entire grow portfolio is included again and is actually given as much priority as the other investment portfolios. That means that technology leaders think that they can start their business activities again in 2021 and also that they will have a substantial investment portfolio."
In the COVID-19 CIO Pulse Survey, PwC examines the sentiments among European CIOs and CDOs in particular and provides insight into the priorities they have been setting during the current COVID-19 crisis. 35 percent of the participating companies have a turnover of more than 5 billion euros and another 35 percent have a turnover of less than 1 billion euros. More than 150 CIOs/CDOs from different countries completed the survey during the week of 4 May. The respondents came from Austria, Denmark, Germany, Greece, Ireland, Italy, the Netherlands, Poland, Spain, Turkey and the United Kingdom, amongst others. The results will be further updated and the second set of results will be announced in June via PwC's COVID-19 CIO Pulse Survey.
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Ragnar van der Valk
Partner, PwC Netherlands
Tel: +31 (0)88 792 63 18
Director Strategy&, PwC Netherlands
Tel: +31 88 792 63 33
Director, PwC Netherlands
Tel: +31 (0)88 792 74 43