The emergency shift from onsite work to remote and hybrid-remote models due to the COVID-19 pandemic helped organizations identify what they need to remotely conduct their daily operations. For one, remote employees need a way to connect to critical business applications and their colleagues from outside the office. This new necessity has driven an influx of cloud-based infrastructure and business tools that are potentially more flexible for many businesses. However, it’s also making some legacy technologies and deployments less cost-effective.
Anything that eliminates the need for up-front spending will be popular among CxOs in 2021. Many businesses are moving away from CAPEX spending in favor of OPEX options that meet the new disparate workforce’s needs with more flexibility and scalability than older technology allows. This change is transforming IT budgets and setups, with subscription-based fees that make it easier to pay for only what’s needed while adapting to growth and maintaining updates. Access to on-premises resources is phasing out, and the need for cloud-based applications is growing in popularity to help support remote teams.
We’ve compiled a list of the top three things CFOs are cutting from their IT budgets next year.
1. On-premise Servers
Cloud deployment of server infrastructure continues to grow in popularity, while spending on non-cloud environments saw double digital declines in Q1 2020. According to the International Data Corporation (IDC), “vendor revenue from sales of IT infrastructure products for cloud environments, including public and private cloud, increased 2.2% in the first quarter of 2020 (1Q20) while investments in traditional, non-cloud, infrastructure plunged 16.3% year over year.”
Running software applications from within the enterprise requires a lot of equipment, physical space to house the servers, and a dedicated team of resources to monitor and maintain them. Upgrading that equipment means buying, reconfiguring, and installing new hardware, and its flexibility and scalability are similarly limited by physical and cost constraints.
Organizations are trending towards a more cloud-centric environment because the costs are usually lower (but not always), scalability options are abundant, and the cloud provider maintains the environment’s integrity from a security perspective. Virtualizing existing servers into a cloud data center environment also adds benefits like faster disaster recovery efforts and increased uptime, thanks to services like replication and cloud backups.
While the initial move to the cloud may put a dent in the budget, it’s almost always more cost-effective than maintaining on-premises data centers. In reality, most companies don’t have the time or resources to upgrade their equipment every time a newer model is released. As legacy equipment falls out-of-date, it causes costly malfunctions, develops security vulnerabilities, and falls behind competing solutions and capabilities. Further, legacy equipment weighs down the prospect of growth with the hefty fees and heavy labor associated with expanding your data center.
By contrast, cloud computing makes updates about as easy as they get. The cloud provider typically keeps its data center equipment updated – including security patching and management as well as new features and capabilities – at no extra cost to you. That means you always have access to the latest technology on the market. Changes in the organization, from downsizing to creating a new branch, simply require a subscription change. Over time, the migration to the cloud pays for itself. We predict that many companies will be making the switch this year.
The caveat here is that cloud environments are not “set and forget.” Maintenance and optimization of the services are required, and many small to medium enterprises turn to managed services providers like ZAG to manage their cloud environments.
2. Office Space
While the COVID-19 pandemic created remote work setups intended to be temporary, many companies found that specific roles are well-suited to remain remote. In fact, 67% of companies expect remote work to become long-term or permanent. Companies like Microsoft, Facebook, Shopify, Square, and several others have already announced plans to permanently adopt remote work.
Further, IT teams tend to be particularly well-suited to remote work, as they are setting up and working on the organization’s remote technology. In a survey on COVID-19’s impact on IT spending, 19% of respondents said more of their IT staff would permanently work from home.
Office space, parking, food, internet bandwidth, and other expenses associated with in-office workers are where many CFOs are making cuts to offset their investment in cloud technology. And for companies that can’t afford to go fully remote, hybrid options are popular as well. Companies are getting creative with part-time in-office schedules, flexible hours, optional collaborative workspaces, and other setups that meet their needs more cost-effectively than the traditional, fully in-office structure.
We expect the hybrid-remote trend to accelerate as CFOs see cost benefits of reducing office space, while CEOs see strategic and productivity gains across the entire organization.
3. Desktop Computers
Desktop spending, accounting for 18% of organizations’ IT budgets in 2019, is expected to drop to 14% in 2021. While the need for desktop computers isn’t likely to become obsolete any time soon due to their power and capacity, many organizations are opting for more portable devices to equip their remote staff in the coming year.
Because of the rapid increase in remote work, employees need to take their devices with them wherever they go. Laptops, tablets, smartphones, and the security solutions required to run these devices safely from anywhere will increase in the coming year as CFOs cut desktop computers from their budgets.
What’s Your Plan for 2021?
As remote and hybrid-remote work becomes a more permanent option for many organizations, CFOs need to consider what makes the most sense to include in their 2021 IT budgets. On-premises, legacy solutions that require significant investments up-front and consistent maintenance and upgrades are making way for flexible and scalable cloud-based applications that support remote workers, allowing them to be productive from anywhere.
Do you have questions regarding your current IT infrastructure? Are you looking for ways to maximize your IT budget in the coming year?
Visit our remote work page to learn about how we are helping businesses like yours shift from their legacy solutions through process improvements, equipment suggestions, and more.