Every company is transforming into a Technology company – COVID19 has ensured this shift. How can CIOs/CFOs/IT Finance Leaders support this?

Executive Summary:
Until recently, the term ‘Tech companies’ was seen as the domain of Silicon Valley companies. However, the impact of the pandemic on how we live, work, shop and entertain ourselves has caused massive shifts in customer demands that would’ve otherwise taken a couple of decades. In response to these shifts, ‘traditional’ companies are increasingly becoming ‘Tech companies’ – thereby necessitating additional disciplines on Sr. IT & Finance Leaders to aid this transition in a safe manner.

Background:
Technology companies dominated the stock markets over the last decade, with the FANG stocks (Facebook, Amazon, Netflix, Google) generating massive returns for their investors. However, these companies don’t look like the technology firms of earlier decades, such as IBM and Microsoft, as they don’t manufacture computer hardware; neither do they sell software. They don’t even make high-tech planes, like Boeing, or high-tech cars, like Tesla.

All these companies are in very mature industries. In terms of where they get the bulk of their revenues, Amazon is a retailer, Netflix is in video entertainment, Google and Facebook are in advertising.

What does it really mean to be a Tech company? What are their characteristics?

The Boston Consulting Group declares that companies from all industries move into the technology sector because it’s “about becoming technology-driven enterprises with the capacity to capture and capitalise on vast lakes of customer and other data and ultimately the capability to create digitally enabled market-leading goods and services.”

A technology company, these days, is any company that can use technology to scale the distribution of its products.

“Today, no company can make, deliver or market its product efficiently without technology.” – Forbes

 Impact of the COVID19 pandemic on businesses
The pandemic has shifted the underlying market fundamentals by at least 2 decades. Some of the key trends are noted below:

  1. The online channel has shifted from an optional sales channel to an essential one for most businesses.
  2.  Business growth isn’t possible without the increased adoption of technology: Businesses requires investment in digital marketing and automation of operational activities. Examples include increased IoT enablement of the supply chain, chatbots for customer service.
  3. Traditional products are increasingly tech-enabled: Regardless of the industry, companies are launching innovative products that have more technology-embedded. Examples include smart home technology devices such as Ring doorbells.
  4. Data as an Asset: Data is being monetised to create new revenue streams and mined to generate cost and financial insights.
    However, the use of technology is only one factor in determining industry status. The speed of digital innovation followed by ever-changing consumer expectations makes using, creating and selling technology a part of every organization’s journey.

A couple of key quotes/metrics that capture the essence of COVID’s impact on businesses below.

“Total online retail sales growth for 2020 was up 36 per cent year-on-year – the highest annual growth seen since 2007”

– IMRG Capgemini Online Retail Index

“We’ve seen two years’ worth of digital transformation in two months. From remote teamwork and learning, to sales and customer service, to critical cloud infrastructure and security—we are working alongside customers every day to help them adapt and stay open for business in a world of remote everything.”

– Satya Nadella, Microsoft CEO, Apr 2020

Actions for Sr. IT & Finance professionals
The cost of the IT Department as a proportion of the overall cost base has risen. The increased costs and remote nature of work require more discipline in IT investment decisions. The 3 key actions that IT & Finance Leaders can take now to be better prepared are:

  1. Develop a shared and detailed understanding of IT costs as desk chats become notoriously difficult.
  2. Develop additional investment metrics of IT costs such as TCO, Unit Costs, etc to improve ROI.
  3. Be more agile in decision-making as the traditional waterfall-based project-based investments may not always work.
    Closing these gaps will aid CIOs, CFOs and IT Finance Business Partners in enabling a smooth transition to the ‘New Normal’.