We’re coming off some of the most aggressive years of digital transformation many of us have ever seen. Whether it was rapid pandemic adjustments, shifting enhanced privacy and security technologies, or riding the wave of automation as employers seek performance efficiency, 2020 and 2021 saw a large influx of capital spending on new technologies.
But We’re Not Finished
We live in a world uniquely positioned at the intersection of historic inflation levels, labor shortages, supply chain slowdowns, and geopolitical security threats. Each of these has its own systemic business impact with unique and urgent demands on technology infrastructure, leaving CIOs urgently and deliberately taking on powerful shifts in capabilities in short time periods with limited resources.
“The amount of time we spend defending against potential cyber threats or privacy breaches is easily a factor of 10 compared to 2018. To respond, we’ll need to invest in responsible AI, edge computing, and a host of other “comes with” technologies in the next 12 months. Getting the budget to successfully implement – now that’s an entirely different discussion.”
– 24-year veteran CIO from the insurance industry
The ability to implement these new technologies is directly proportional to a company’s ability to acquire the capabilities within budgets often strained by the unique convergence of today’s business environment issues. As such, more CIOs are turning to a once commonly used tool: leasing and financing. Predictable payments, lower up-front outlays of limited budget dollars, enhanced mid and end-of-life flexibility, and the ability to more effectively stay on the cutting edge of technology over time open the door to creative funding as a central vehicle to power an IT function.
In a recent survey of over 750 IT leaders, 68% were planning on leasing technologies in 2022 – up from 34% in 2018.
With change upon us, examining some of the top IT investment areas and what assets IT leaders are looking to lease or finance can offer powerful insight and ideas for funding 2022 IT budget requirements.
Data gathering is no longer a series of transactional research projects. It’s a living decision engine driving business evolution in everything from inventory levels to acquisition strategy. Implementation of machine learning infrastructures reduces reliance and time spent on human analysis and works to get business leaders closer to the next best decision, faster. But machine learning goes further. The right machine learning capability can move companies into decision automation, increasing efficiencies and the velocity of business.
Of the CIOs surveyed that are building a scaled machine learning infrastructure, the assets they identified as most likely to finance or lease include:
- TPUs from Google
- Nvidia GPUs
- Intel CPUs, FPGAs, ASICs, cloud-servers
“To meet the demand of our new machine learning infrastructure, we found out how little hardware we had in place to carry the load from a CPU/GPU perspective. Machine learning seems to be hungry for processing speed, so making one-time investments makes little sense. Leasing gives us a predictable budget expense and a path to upgrade on a rolling basis every 24-30 months.”
– CIO from a midwestern food packaging company
Today’s cloud isn’t your father’s cloud computing. Distributed cloud is now a reality that is finding its way across corporate America. Distributed cloud can execute a unified cloud strategy that meets customized service requirements of individual locations, reducing data costs, decreasing latency, and ensuring compliance with data that has to remain near to a specific geography.
On-premises, hosted, and earlier cloud approaches moved spend from CAPEX to OPEX somewhat, but still relied on a capital intensive, data center-centralized compute function. Distributed computing and distributed cloud accelerate the IT trend, moving more CAPEX to OPEX as less hardware will be required in the operations model. And at least in some cases, this creates a unique opportunity to change the outlook on funding other hardware needs.
“Leasing our hardware has always been more beneficial to us from an IT perspective, but we’ve never been able to convince our finance leaders. But with our shift to distributed cloud and the associated massive move to an OPEX department rather than a cost-center CAPEX sucking sound, distributed cloud became a central catalyst to a shift toward leasing any remaining hardware needs away from traditional CAPEX allocations.”
– CIO from a western US multibillion-dollar retailer
Reduced latency, better speed, tighter security, cost savings, and greater scalability are just some of the benefits gained from the wave of edge computing rolling across corporate America. To cope with the increasing amount of data, edge computing hardware is being deployed to alleviate the burdens placed on the cloud and data centers.
Most CIOs find themselves ill-equipped to quickly act on edge computing implementation or take advantage of edge computing benefits. The hardware is unique and often requires new, relatively high-dollar investments. From power consumption and connectivity to ruggedized builds and computing power, CIOs find themselves investing primarily in high storage and memory servers.
“Our conversion to edge computing would have been an eight-figure spend in traditional CAPEX – a non-starter in any budget conversation. But our scaled transition, combined with leasing, allowed us to swallow this elephant one bite at a time with a built-in capacity to upgrade without our bean counters coming unhinged in a few years.”
– CIO of an internal energy company
Third-party Data Center Hardware
Centralization of computing power and the cloudification of corporate America have led to explosive data center growth needs. And as edge computing and distributed cloud have previously illustrated, the trend is likely to continue indefinitely. But the capital-intensive nature of data centers is often at odds with an IT leader’s desire to meet the evolving needs of internal or external customers. Server investment is not only increasing but also accelerating, with more data centers requiring newer servers sooner to meet rapidly evolving digital transformation needs.
Of 312 data center leaders recently surveyed, 81% will invest 35% more on servers this year than in 2018. 74% have accelerated server replacement cycles by at least one year since 2018.
“The good news is that our data center operations have elevated to a primary business function in our company. The bad news is the budgeting conversation required to keep us there. But we’ve found a nice balance and path to scalability by incorporating leasing with our server needs to better manage technology lifecycles and budget requirements.”
– EVP and CIO of a major national technology solutions company
Funding Technology Leadership
To be a technology leader, you must go beyond vision and intellectual capital. You’ll need an approach to financial capital to facilitate digital transformation and shifts from CAPEX to OPEX.