5 hot IT budget investments — and 2 going cold

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The economy may be looking uncertain, but technology continues to drive the business and CIOs are investing big in 2023. At the same time, they are defunding technologies that no longer contribute to business strategy or growth.

It’s not a stretch to say that across the board, CIOs are continuing to invest in some form of AI. Upgrading cloud infrastructure is critical for deploying broad AI initiatives more quickly, so that’s a key area where investments are being made this year.

Fifty-two per cent of organisations plan to increase or maintain their IT spending this year, according to Enterprise Strategy Group. This includes spending on strengthening cyber security (35 per cent), improving customer service (32 per cent) and improving data analytics for real-time business intelligence and customer insight (30 per cent).

The numbers are higher from Foundry’s 2023 State of CIO survey, which finds that 91 per cent of CIOs expect their tech budgets to either increase or stay the same in 2023. CIOs anticipate an increased focus on cybersecurity (70 per cent), data analysis (55 per cent), data privacy (55 per cent), AI/machine learning (55 per cent), and customer experience (53 per cent).

Here is a look at five hot technology investments CIOs and other IT leaders are making in 2023 and two that have grown cold.

Hot: AI and VR/AR

With digital transformations moving at full throttle, and a desire to stay innovative, it should come as no surprise that use cases for virtual reality, augmented reality, and artificial intelligence continues to grow in several verticals. For example, New York-Presbyterian Hospital, which has a network of hospitals and about 2,600 beds, is deploying over 150 AI and VR/AR projects this year across all clinical specialities.

In one use case, AR and VR are being used to re-create people’s spines in a model so that surgeons can look at them in advance of surgeries to help them perform better, says Peter Fleischut, group senior vice president and chief information and transformation officer.

Besides surgery, the hospital is also investing in robotics for the transportation and delivery of medications. Massive robots are being used in pharmacies to automate processes such as pulling pills, ointments, and creams, putting them into packs, sealing them, and transporting them to floors, he says.

The hospital is using automated voice and AI technologies to deploy virtual chatbots in its call centres and is making “significant investments in Salesforce” to better understand its consumers from a CRM perspective, Fleischut says.

In obstetrics, the hospital has invested in a platform that uses AI to monitor and inform a doctor about any fetal issues a mother or baby is experiencing for faster and quicker intervention.

Other organizations are equally bullish about continuing their investments in AI this year. “I’d be remiss if I didn’t say AI, AI, AI,” which “will probably accelerate faster than anyone can think,” says Chris Nardecchia, chief information and digital officer at Rockwell Automation. The company is embedding AI into each level of the tech stack it sells to customers, he says.

“We run factories and help companies run them and optimize them” and AI is used to optimize everything from getting more throughput to better quality to preventative maintenance, productivity, and cost optimization, Nardecchia says. “It’s all about uptime and input. And there’s a labour shortage in those industries so [the focus is on] more automation and more AI.”

This applies to his IT group as well, specifically, in using AI to automate the review of customer contracts, Nardecchia says.

Dental company SmileDirectClub has invested in an AI and machine learning team to help transform the business and the customer experience, says CIO Justin Skinner. One of IT’s first big projects is embedding AI into its SmileMaker platform to access its user database “to create an educational experience for our customers and show them what SmileDirectClub can do for them. This technology will help our customers get started quickly and will also allow us to reach more people.”

AI is also enabling users to do a quick 3D scan of their mouth with their mobile phone, so they can see their potential new smile in a matter of minutes, Skinner says.

The company will also shift investments toward using AI “as an outsourcing model” to free up human capital, Skinner adds. That way, employees “can focus on creative ways to move their respective areas forward. We need to reduce investment in projects that require transactional workforce attention.”

Modern-day CIOs or CTOs have to start thinking like business owners if they are to be successful, he says. The idea is to “free up as much of our team members’ time as possible to be more strategic, customer-focused, and value-driven.”

Hot: Zero trust and other security initiatives

In 2022, the College of Southern Nevada moved its data centre to the cloud to implement cloud access security broker (CASB) technology to secure all student email traffic and mitigate trusted identity breaches.

Now, as more faculty, staff, and students are accessing information on-premises and in the cloud, IT has a borderless network and the team is implementing a zero-trust network architecture, says CIO Mugunth Vaithylingam.

“This adds additional context to our security layer and allows us to grant access to just what our users need — and no more — when they need it,’’ Vaithylingam says. “These network, security, and cloud changes allow us to shift resources and spend less on-prem and more in the cloud.”

New York-Presbyterian will also invest in zero trust this year, adding a security operations centre (SOC) for 24/7 network monitoring as well, Fleischut says.

Cold: On-prem infrastructure

As they did in 2022, many IT leaders are reducing investments in data centres and on-prem technologies.

“We will continue to reduce our investment and presence at our on-prem data centre,’’ says Raju Seetharaman, senior vice president of IT and transformation at life insurance company Legal & General America. “We have been moving our workloads to the cloud while we create new cloud-native digital business capabilities.”

At the same time, Seetharaman says not all legacy technology is cold, and LGA is embracing legacy systems that enable continued business growth. “We are investing in modernizing and migrating our legacy [systems] so we can leverage the cloud-managed services,’’ he says. “This should secure our business strategy for the next five years and longer.”

On-prem infrastructure will grow cold — with the exception of storage, Nardecchia says. Some storage will likely stay on-prem while more are pushed into the public cloud, he says.

Vaithylingam says the College of Southern Nevada will shut down its on-prem data centre — one of the largest in Nevada — and plans to fully move all workloads and infrastructure to Microsoft Azure.

Hot: Data and cloud infrastructure

At New York-Presbyterian, using technology to reduce friction for patients and providers in the short term means increasing investments in multimodal data, Fleischut says.

For example, the hospital wants the ability to look at imaging and pathology data so staff can better diagnose patients faster and quicker, he says. That also requires investing more in cloud infrastructure for storage and compute power resources so data scientists can process data, understand it, and be able to translate it “for benefits at the bedside,’’ Fleischut says.

Data is also critical in the insurance domain, and LGA is continuing to invest heavily in secure, scalable, high-performing data operations to foster business innovation and transformation, says Seetharaman. “We are working to transform ourselves into a data company mindset, finding newer ways to leverage data to support business growth.”

Hot: Low-code/no code

For most business teams, the time it takes to go to market with product updates is key to success and the quicker they can do it, the better, Seetharaman says. “Low code/no code solutions give business teams the ability to deliver changes quickly,” he says.

For example, pricing and underwriting are two key areas where life insurance carriers can bring market-differentiating product offerings to customers, Seetharaman explains. “At LGA, we have been good at continuously improving our ‘time to market’ KPI through multiple technology solutions and one key area of focus is the low code/no code capabilities that we have built within our digital platform.”

LGA will continue to invest in custom-built low code/no code systems to enable the company to deliver changes without hand-crafting code and time-consuming deployments, he says.

And it’s not just application development where such tools are having an impact. Businesses are exploring new ways to apply low-code data science to unlock insights on how to improve processes, says Matt Mead, CTO at tech modernization firm SPR. “AI and machine learning will be leveraged to continue making enterprises more efficient and although still in its infancy, its application for specific use cases will separate the technology leaders from the laggards,” he says.

Cold: Legacy telecom

Legacy telecom and paging systems that New York-Presbyterian owns have been “deconstructed, defunded, and taken out of the infrastructure,” Fleischut says. The hospital has instead invested in between 20,000 and 25,000 mobile phones for its workforce.

Australian experiential tourism company Journey Beyond recently revamped its contact centre as part of a customer experience transformation. Madhumita Mazumdar, GM of information and communications technology, replaced six different telecom systems, along with its contact centre, in favour of the cloud-based unified communications platform RingCentral.

“The different communication solutions were unable to provide an integrated 360-degree customer view, which made it difficult to ensure a consistent, unrivalled customer experience across all 13 tourism ventures,” she says.

There are indications the voice market is slowing. IDC is forecasting a 5.1 per cent decline year over year in worldwide spending on fixed voice services in 2023. Still, worldwide spending on all telecom services (fixed, mobile, voice, and data) is forecast to increase by 2.3 per cent in 2023, the firm says.

Enterprise communications services saw slow but steady 1.6 per cent growth in 2022, according to Gartner. That is not expected to last.

“The unified communications market’s meagre 1.6 per cent growth in 2022 masks the massive conversion in the telephony market from premises-based delivery, which will suffer a 7.6 per cent decline, to cloud-based delivery, which will post 12.9 per cent growth,’’ the firm wrote in a newly-published report on worldwide IT spending in Q4 22.

“Across communications markets, we expect to see a slowdown in legacy solutions like enterprise fixed voice services, premises-based telephony systems, and legacy contact centre solutions,’’ Megan Fernandez, director analyst, at Gartner, told CIO.com. “Premises-based telephony will see the most significant slowdown in investment as businesses decide to defer their upgrades and replacements.”

The legacy/fixed voice services market segment is expected to decline at a 4.3 per cent CAGR through 2026, Fernandez notes. Further, long-term projections are not expected to improve, she adds, since many businesses will migrate to cloud-based approaches for their communications needs when they do decide to make a replacement decision.

Hot: IT talent

IT talent acquisition is still a priority this year, with 41 per cent of IT leaders planning to ramp up hiring, according to the 2023 State of the CIO. New hires are anticipated in cyber security (39 per cent), app development (30 per cent), and data science/analytics (30 per cent) positions in the next six to 12 months, the report says.

Fleschut says he will also hire more IT personnel this year, especially data scientists, architects, and security and risk professionals.

IT talent is a hot area for Rockwell Automation as well, says Nardicchia, who will invest in user experience and QA developers, as well as data engineers, and AI/analytics and cyber talent.

Increasingly, businesses are realizing they need to invest in skills development to leverage emerging technologies, agrees SPR’s Mead. They will also invest in director-level leadership to help lead the charge on new business opportunities, he adds. “Whether it be security, data science, or cloud, it all ties back to your people’s abilities, so reskilling and upskilling will see momentum,” he says.

Related: 6 tips for making the most of a tight IT budget

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