7 hot IT budget investments — and 4 going cold

Riding the digital transformation wave that accelerated during the pandemic, enterprises will continue their aggressive push to leverage technology both to fuel innovation and transform business operations in 2022. To do so requires tech investments.

In acknowledgment of this, companies are increasing budgets for new and existing technologies. Overall digital spend is projected to be 55% of the total IT spend by 2023, up by around 10% from 2021, according to Accenture.

Spending will be focused on four key areas, according to Ashley Skyrme, a senior managing director at Accenture. The first will be in areas where organizations “reimagine and innovate,” by quickly piloting and prototyping new use cases to prove value where speed to market is critical — for example, in AI, blockchain, and AR/VR.

Another area of spending focus will be on growing the business by scaling and differentiating with “game-changing investments that drive new capabilities or revenue streams,” for example, platforms for data and analytics, Skyrme says.

The third area will be to digitize the value chain with competitive business capabilities or process digitization such as ERP/CRM, quality, and supply planning systems.

The final area will be essential technology capabilities for running the business and staying secure and in compliance with no direct revenue impact, such as data center and network, she says.

Here’s a look at seven hot and four cold technology investments CIOs and other IT leaders are making in 2022.

Hot: Cloud-native managed services

Investments will be made to leverage cloud-native managed services, says Mark Shank, principal, advisory, at KPMG. In prior years, enterprises were afraid of vendor lock-in with their cloud investments. “Now, more cloud-mature organizations are going toward cloud-native apps and they are less afraid of being locked in because of big benefits in the short term,” according to Shank.

The biggest benefit? The ability to get more done, especially in a tight IT talent market. Previously, organizations might have run their own data lakes, and when they migrated to the cloud, they were still responsible for managing the container that ran their database, he says.

“Now they’re saying, ‘I don’t want to be responsible for that infrastructure’ and just use the data services provided by the cloud vendor,’’ Shank says. That way, the internal people who were tasked with managing that cloud infrastructure can shift their focus to other areas.

Kevin Martelli, principal, advisory, at KPMG, agrees. The fear of vendor lock-in “isn’t as important as the services the vendor will be able to provide for organizations to adopt up the stack and become more nimble and quicker and cost-effective in the delivery [of products] to market,’’ he says.

Hot: Increased use of IoT sensors and analytics

Although it has “gone up and down the hype curve,” IoT sensors are starting to gain a lot more traction, and more investments will be made in managing and monitoring them, Martelli says. Organizations are putting increasing numbers of sensors out in the field for energy tracking and laying private 5G networks to facilitate communication or in warehouses to better track and enable efficiencies there, he says.

“We’ve had this [IoT] practice going for few years now and we’re getting more interest than we have the ability to respond to,’’ Martelli says.

Cold: Legacy data warehouses, data lakes, appliances, and private cloud

Firms are seeing a lot of “cost structures” to legacy databases and data structures used on-premises for analytical outputs. Now they’re taking advantage of newer technologies in the marketplace, Shank says. This will lead to defunding of legacy warehouses, data lakes, and appliances.

The argument could also be made that funding for private clouds is growing somewhat cold, he adds, because “the velocity is decreasing. … As I look across the industry, it’s a scenario where there used to be a high growth rate and it’s gone down a lot.”

On-premises data warehousing platforms are “fading out, because functionality is being offered in the cloud” and providers haven’t expanded their vision to look at consuming them as services, Martelli says.

Cold: On-premises data centers

Spending on internal data centers will stay flat to slightly decreasing, Martelli says. “Companies are looking for opportunities to leverage clouds,’’ because there are “huge cost implications to managing your own data centers and rack and stack and build.”

Hot: Employee engagement platforms

2022 will be a year of re-platforming and consolidation to prepare for growth at healthcare provider ChenMed, says Steven May, chief technology officer and interim CIO.
ChenMed is in a “hypergrowth phase” and has been assessing whether it has the right platforms, technologies, and processes to accommodate this aggressive growth, May explains. That means taking a hard look at whether existing systems can scale and handle that growth, he says.

Last summer, “we pretty much mandated that people come back in 3-2 [day] basis,’’ and other tech investments will be made to work in a hybrid model, he says.

That includes focusing on employee engagement technologies to create a better employee experience. “We haven’t selected vendors yet, but overall, that’s a theme for 2022. In this new world, how can we bring technologies to bear in all these great new employee experience tools and embed those to have a richer employee experience in this new operating model. That will be a big investment.”

ChenMed is looking beyond the straightforward collaboration tools it already uses. “There’s other tools out there that don’t just do video and audio conferencing and shared whiteboards but create more fun and engaging workspaces,’’ he says, citing a tool called Sococo that enables users to create a digital depiction of an office space. Another one that ChenMed has looked at is called Nooks, May adds. These tools are “trying to find innovative ways to drive up that social interaction perspective rather than plain-vanilla tools,’’ he says.

ChenMed will be investing in next-level collaboration to experiment with creating “a whole metaverse” world, May says.

The healthcare company is still in the throes of the budgeting process and figuring out what its growth target is but May says IT’s budget will reflect that. “If we’re targeting to grow by 50% next year, our standard IT operating budget would expect to increase in a similar manner.”

Hot: Data and analytics

Arcutis Biotherapeutics, a late-stage biopharmaceutical company focused on developing innovations in immuno-dermatology, is investing significantly in its data and analytics infrastructure, says Raj Madan, chief digital and technology officer. “This includes foundational data and analytics to ensure that we can monitor and optimize our commercial operations and … actively track and [take] action on insights from our medical affairs teams as they interact with dermatologists,’’ Madan says.

There will also be more strategic initiatives around patient and healthcare provider segmentation and targeting to ensure that Arcutis maximizes its reach and engagement to continue to meet the needs of people suffering from skin conditions, he says.

The company will also “dial up our investments in marketing and advertising technology,’’ Madan adds.

In the spirit of being agile, Arcutis recently invested in a set of AI tools for experimental purposes to see whether they would help officials mine for validated or novel targets, he says. The results were underwhelming.

“The insights we got from the tools wasn’t anything we didn’t already know via our medical teams, and we decided to not further our experimentation in this space,’’ Madan says. “This is a great example of ‘failing fast’; taking the learnings and moving on.”  

IT requested about a 20% increase in spend and “it was received with an understanding that we break our work down into smaller chunks/sprints,’’ Madan says. IT could potentially receive even more incremental funding should each sprint deliver value for Arcutis’ patients, healthcare providers, and employees.

“This essentially means that as we deliver and prove more value for our initial investments, we look to commit more toward data, analytics, and digital spend,’’ he says.  

Hot: Machine learning, data science

Machine learning and data science will continue to be a key area of investment focus for
Acuity Knowledge Partners, which provides research, analytics, and business intelligence to the financial services sector.

“We have a range of machine learning models in production and a long backlog of new opportunities to explore,’’ says David Fellows, chief digital officer. “To ensure that our infrastructure does not become a bottleneck in getting our models to production, I expect us to put significant focus on machine learning operations, commonly known now as MLOps, this year.”

Acuity has a long relationship with AWS and company officials are working with the cloud provider to utilize its SageMaker machine learning platform to build ML pipelines, Fellows says. The goal is to allow Acuity to deploy new models into production as frequently as it wants, just like the firm does with its SaaS-based apps and digital services, he says.

Hot: Customer experience

In 2022, Epson will focus on several IT initiatives, with an emphasis on elevating its brand to become synonymous with “ease-of-doing business” for partners and providing a “world-class customer experience,” says Michael Wang, CIO at Epson America.

To accomplish this, IT is examining how to turn its customer and partner data into business insights to better anticipate customer and partner needs. “Whether creating an alert system for end users about expiring warranties and offering extensions when appropriate or delivering proactive B2B services for equipment that customers rely on to run their business, this seamless approach to deliver value is an IT priority,” Wang says.

For its corporate customers, IT will use data to preempt potential product issues to help them avoid downtime and ultimately, loss of revenue, he says.

“We’re also focusing efforts on providing a world-class online interactive experience, with heavy investments on ensuring interactions in our customer and partner portals are seamless and hassle-free,’’ Wang says. “Customers want to engage with us on their own terms, and IT has spent resources examining how to best support that experience.’’ This includes transforming online interactions with Epson by ensuring customers need only one ID to manage all their interactions, he says.

In 2021, with the change in buying patterns moving away from brick-and-mortar and more toward online shopping, Epson increased funding on initiatives to improve a customer’s ecommerce experience, he says. Those programs will continue and potentially expand in 2022.

As a percentage of total IT budget, Wang says he shifted the budget and increased their digital transformation investments by over 50% year over year from 2021.

Cold: On-premises workloads, hardware

Acuity’s cloud strategy is already very mature, Fellows says, but the pandemic has highlighted the need for the firm to speed up migration of its remaining on-premises workloads. “On-premises workloads have become a disproportionate drag on our time … and, therefore, we will no longer be making any investment in on-premises application or server infrastructure,’’ he says.

As an offshoot of that, Acuity is reevaluating its hardware strategy and associated spending, Fellows says.

“While I would not yet go as far to say that we are planning to move everyone to low-cost hardware or a bring-your-own hardware model today, we are hopeful that our [desktop as a service] DaaS strategy will allow us to break away from the traditional end-user hardware compute model and facilitate a shift in capital going forward,” he says.

Hot: Security

Security has been a “trending spend for several years” and 2022 will take those investments to the next level, says Jason Johnson, CIO at Sweetwater, a music technology and musical instrument retailer. 

Part of that will include more funding for vendor risk management as supply chain attacks and 2021 have “re-enforced that borderless networks and work from home are here to stay,’’ Johnson says. Public cloud adoption, which the company has also pegged as a long-term strategy, will grow to accelerate the ability to provide sound security and borderless networks, he says.
Acuity also plans to invest in foundational IT and cybersecurity initiatives, Fellows says.

Cold: Third-party software development

Sweetwater says outsourced development will take a back seat to insourcing, “as agile software development wins the enterprise,” Johnson says. So “any contracting of software development continues to feel slow in moving the needle for building differentiated customer experiences.” 
IT will receive about a 25% increase for capex spending and about 50% for staffing, Johnson says. “I believe most businesses are investing heavily in IT right now as a function of product/service leadership in their market. If they are not, they need to be. Every company is a software company at this point.”