Survey: Houston IT leaders tackle 2020 – How do you compare?

Posted 09/24/20 Casey Hall

Whatever plans companies and IT departments had at the beginning of 2020 were superseded by new priorities when economic shutdowns due to COVID-19 started. In Houston, a partial reopening of the economy was halted during June, and at that point, it became clear companies were making choices affecting the rest of the year.

Because the Houston economy is heavily influenced by the oil and gas industry, business conditions were impacted by more than just COVID-19. Prior to the pandemic, oil prices had already been lower for geopolitical reasons. COVID-19 then broadly impacted the entire economy which further impacted oil and gas as energy demand lowered. It was a proverbial one-two punch.

To help our clients understand the breadth and depth of impacts, our team conducted a survey of local IT leaders during July as a mid-year check. The survey was sent directly to known IT leaders and was not open to the public. While survey responses were anonymous by default, respondents were able to self-identify.

Based on those who did identify, oil and gas companies were represented the most at over one-third of respondents. Healthcare and pharmaceuticals were second in representation with B2B services, transportation, and utilities tied for third. Other industries represented included chemicals, distribution, finance, and real estate.

Respondents received a detail report of results, but we are sharing three themes that may be relevant to companies and leaders in other cities.

Companies cut quickly

An oil and gas CFO friend of mine has said one key lesson learned from the 1980’s oil crash was this: “Whoever cuts fastest, wins.” Survey results and anecdotal communications with other clients indicate more industries than oil and gas applied this page from the playbook.

  • 75% of companies reported deferring non-critical projects and one-third of companies had deferred most projects (both critical and non-critical); oil and gas companies were heavily represented in the latter.
  • 50% of companies reduced IT headcount (employees and contractors) with 14% cutting aggressively. The aggressive cutters were primarily oil and gas or energy related.
  • 48% cut third-party IT services with 26% cutting aggressively. Oil and gas and healthcare were the most represented here.

A common observation about managing IT priorities is that it is easier to cut supply (IT budget) than it is to cut demand (stakeholder requests for IT capabilities). On one hand, business functions that also cut headcount no longer have the same demand for IT support because there are fewer users. On the other hand, the same business functions need to be more aggressive in seeking ways to do more with less and will still view technology as the lever to help them. They will often seek ways to self-fund, including so-called “Shadow IT” spend on software and services not requiring IT on-premise infrastructure support.

To avoid potential negatives of Shadow IT, IT leaders can choose to collaborate with business leaders on pay-as-you-go SaaS/cloud applications where direct business savings justify the operational expense of these “point” applications. A critical success factor will be having current (or future) BI, integration, and data management strategies to tie workflows and data together, especially where integration back to ERP transactions and/or data is required.

Some companies may be ready for a reset

In addition to cutting headcount and IT services, 41% of companies reported seeking new software to replace existing, more expensive systems and 26% reported already eliminating applications. Given that some companies may experience permanent changes to their business model and scale, a reset of the IT strategy and application portfolio may be needed. A reset can include:

  • Re-justifying an existing ERP to validate it is not too complex, too expensive, or too out of date to support the new desired business model.
  • Reviewing the portfolio of “point” software solutions and determining if the aggregate costs of these tools is reasonable compared to consolidating to a software partner with an integrated suite or migrating to a modern development platform (ex: MS PowerApps).
    • A TIME Analysis (classifying applications and IT services by Tolerate, Invest, Migrate, Eliminate) is another approach for rationalizing IT capabilities your company requires.
  • Assessing the current balance between on-premise vs. cloud infrastructure and insource vs. outsource support models to determine if the go-forward company scale is better suited to a different model.

Both business and IT strategy changes that previously would have been challenging to gain alignment on can potentially be acted upon quickly. IT leaders may experience both greater freedom to implement long-desired changes and some discomfort as they are asked to retire long-successful platforms and restructure their organizations.

Work from home has been managed well, but …

Part of the survey focused on whether the risk profile of companies had changed as they responded to COVID-19 and business conditions. Overall, IT leaders are reporting that risk is being managed.

  • 100% of companies report “no” to only low increased risk in maintaining their IT infrastructure.
  • 92% of companies report “no” to only low increased risk in maintaining security.

Some companies reported reducing network capability because of user and site reductions while simultaneously adding and/or upgrading network capability to support the higher volume of remote work.

A hypothesis is most companies assumed the new work-from-home (WFH) model would be temporary and made exceptions to their policies and processes to quickly meet the need. We are now more than six months into WFH with some companies looking to offer it permanently. Those that do may require re-assessing their risks, policies, processes, and architecture to ensure WFH can be controlled permanently. Below are example questions IT leaders can ask themselves:

  • Is the current process for provisioning laptops and/or virtual desktops for new hires and terminations efficient and controlled for broad, ongoing use? Will processes for tracking IT assets need to be changed?
  • Does network performance and security need to be managed differently to support a dispersed user base? Are users routinely accessing various tools for online meetings with people outside the organization a unique risk to mitigated?
  • Do patching processes need to be planned and managed differently to ensure timeliness and efficiency?
  • Do data management and data security strategies need to be enhanced?

Wrapping up

As described above, the survey was conducted in July when companies were past the abrupt changes made in response to the initial COVID-19 shutdowns. However, many companies were still determining what the rest of 2020 and their plans for 2021 will be. We will survey Houston area IT leaders again in October to gain more insight.

If you have questions or would like to receive the next survey (including if outside the Houston area), please contact us here.

Casey Hall is a Managing Director, Business and Technology, for Vaco’s Houston office and helps companies solve complex business problems and optimize their use of information technologies.

SPECIAL EVENT FOR OCTOBER: To gain insight into trends other Vaco regions are seeing, you can register and attend Vaco’s upcoming webinar, Five Ultimate Tech Industry Trends Driven by COVID-19.