The Future of IT Dynamic Investment

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THE need for businesses to rapidly innovate and pivot in response to ever-changing market conditions, trends, and business needs has never been greater. Agile, market-speed organizations pursuing modern digital capabilities, services, and customer experiences are recognizing that amid the “need for speed” in the digital economy, the information technology (IT) function itself needs to develop the ability to rapidly re-prioritize and re-allocate resources to deliver the most value as business opportunities emerge.

For cost transparency and cost-optimization to be fully exploited amid today’s typical resource, staffing, and budget challenges, dynamic investment should deliver new capabilities to prioritize technology spending based on improved transparency and on the business value that innovation can deliver. This helps to meet evolving customer, marketplace, and technology needs. Rather than prioritizing innovation investment at the beginning of an annual review process and shuffling resources as required, prioritization should be continuous and based on both past and expected future value produced.

Bringing IT and finance teams together

ORGANIZATIONS on the wrong side of the digital divide are finding it increasingly difficult to compete and this widening gap is creating conditions for a “winner-take-all” market. As we stress to clients, in the race to innovate and transform, dynamic investment is essentially about funding innovation at scale. Success in today’s fast-moving and hypercompetitive environment requires a modern culture of innovation, speed, and agility—with each “experimental” technology initiative repeatedly and routinely tested against a clear articulation of its value and viability.

Prioritizing technology investment and innovation in ways that enhance and sustain agility, growth, and business value have become indispensable. Unfortunately, many organizations continue to pursue a quantitative approach that tends to prioritize return on investment over all other measures of value during IT funding reviews.

Turning to a balanced scorecard

COMBINING quantitative considerations with qualitative data and metrics delivers crucial insights into key areas such as market trends, customer satisfaction and experience, brand awareness and reputation, operational improvements, risk mitigation, and compliance and skills needs. Success with this approach implies new levels of collaboration and agreement among business leaders within the tech and finance functions on emerging data insights and the investment needed for a timely, agile response to business and marketplace conditions.

Replace project budgeting with product funding

TODAY’S business leaders ultimately need to understand and be accountable in new ways for the efficient allocation of resources, the cost implications of every technology-funding decision, and the value being delivered to the business.

Unfortunately, IT governance often remains misaligned in balancing risk and technology performance. A single governance model focused on predictability and accountability has traditionally been viewed as suitable for all IT spending. However, a single monolithic governance model—and the lack of transparency regarding both IT spending and business value—often produces IT investment decisions that are poorly informed and inefficient.

The focus should shift from tracking and predictability to enabling the flow of value. The dynamic investment governance model replaces traditional project budgeting with product funding, addressing key considerations such as decision-making policies, roles, and rights among leadership regarding technology investment.

To maximize the agility of the business and its growth opportunities, technology stakeholders who are closest to the products and value streams need to acquire a new voice in the process and its prioritization decisions. Done right, a new approach allows for faster technology advancement that will likely enhance growth and prosperity for the business.

Reforming the Philippine digital landscape

THE “2020 Philippines Digital Economy Report” released by the World Bank, stated that “Increasing digital adoption is hampered by expensive and unreliable internet connectivity, low use of digital payments, and difficult logistics.”

“As part of transitioning to a post-pandemic world, we need to increase digital adoption, whether in the government or private sector, through digital reforms that support technology investments. Prioritizing policies and regulatory frameworks to address internet and other infrastructure challenges will help enable a more digitally friendly business environment.”

On the other hand, the private sector could contribute by supporting the government with technology solutions and projects that will help mitigate digital gaps in our country such as digital payment platforms, telecommunications infrastructure upgrades, or improved logistics services, to name a few, and could also maximize public-private-partnerships (PPP) arrangements.

In conclusion, today’s business leaders need to ask themselves if their business is truly generating appropriate value from its technology spending and innovation. In today’s fast-evolving reality, where the pace of change continues to accelerate, businesses also need to consider the ultimate “cost” to the business of not innovating and transforming in ways that can support future growth and competitiveness. Digital leaders are showing the way and there is no time to lose in the race to innovate and adapt at the speed of the market.

The excerpt was taken from the KPMG Thought Leadership publication: https://assets.kpmg/content/dam/kpmg/xx/pdf/2021/06/future-of-it-dynamic-investment.pdf

Gilbert T. Trinchera is the technology consulting partner of KPMG R.G. Manabat & Co. (RGM&Co.), the Philippine member-firm of KPMG International. Trinchera could be reached via ph-kpmgmla@kpmg.com and/or www.home.kpmg/ph. This article is for general information purposes only and should not be considered professional advice to a specific issue or entity. The views and opinions expressed herein are those of the author and do not necessarily represent KPMG International or KPMG in the Philippines and the BusinessMirror.

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