of CIOs say their companies are investing significantly in digital transformation
consider tax strategy at the start or throughout digital transformation projects
consider the metaverse to be very important to their innovation strategy
There are always some unknowns in business, and right now those include how exactly the pandemic will play out, what the outlook for corporate taxes will be and when supply chain disruptions will ease. But there’s one thing technology and business leaders are pretty certain about: digital transformation and its acceleration to support their business strategy. In our survey of more than 650 business executives, including 89 chief information and chief technology officers, 60% say capitalizing on digital transformation initiatives is very important to their businesses in 2022. It ranks second, behind the enduring priority of hiring and retaining talent (77%).
Business leaders also appear to be putting their money where their mouths are, with 59% saying their companies will invest a lot in digital in 2022. They’re driven to make these investments for the more obvious reasons like enhancing competitive capabilities, supporting their evolving talent strategy, agility and decision-making. But they’re also doing so in response to the evolving global tax environment and ongoing tax uncertainty, with 42% of all business leaders and 53% of CIOs indicating they will accelerate digital transformation initiatives.
For CIOs this means continuing to take a leading role in business strategy and charting the company’s course for tomorrow—all the while meeting the pressing demands of running IT today. In this crucial role, CIOs will help guide the rest of the leadership team in making the technology investments that will be essential to long-term strategy, especially cloud-related transformation. Across the C-suite, executives are taking an active role in all areas of cloud and digital strategies, even as companies are challenged to maximize the return on investments. As chief educators and conveners, technology leaders will work with the rest of the C-suite to drive innovation and growth via new cloud-based products and services.
Successful collaboration means meeting other leaders where they are. COOs and CFOs, for example, are currently more conservative in their appetite for digital transformation investments (51% and 46%, respectively). This may be due to an intensified focus on shorter-term results amid rising inflation and demand challenges. At the same time, human resources, risk and tax leaders are more bullish. This last group is instrumental, as many businesses are only just beginning to understand how tax considerations can drive considerable value for transformation initiatives (more on that below). Regardless of where individual executives fall, the most important thing for CIOs is to help build a unified team with deep digital and agile capabilities.
While every C-suite leader now has a role in digital transformation, one underappreciated collaborator may be your tax leader. That’s because tax considerations, including R&D tax credits, state tax credits and incentives and intellectual property management can help offset transformation costs, identify potential liabilities and add value. In our survey, it’s clear that many CIOs are not yet fully taking advantage of this powerful collaboration. They may think about tax, but not consistently or early enough. When asked when they think about tax during a digital transformation initiative, just 17% did so during the planning phase and 13% said throughout the project. An additional 45% did so during the requirements gathering and design phase.
There are considerable benefits to engaging with your tax leader early and often. At the front end of a digital transformation project, working closely together can help build a stronger business case. For example, one global company that was developing a cloud-powered marketplace ultimately chose to house its research and development in the US in order to realize federal R&D tax credits applied to contractor wages. Likewise, a real estate development company that was building a new cloud-based platform worked with the tax team on its technology plan and identified an additional $200 million in tax savings over the life of the project. Sometimes it’s a matter of making sure transformation projects are capturing high-quality data that can inform better taxability decisions down the line. For example, data that has more information about a particular purchase, taxes paid to vendors or shipping details can help companies identify where they might be overpaying taxes or where they can limit their exposure.
When asked about where they’ll spend their time and money in 2022, CIOs said their top priority was refining their operating model to be more agile. This means taking a holistic approach to how they get things done, addressing people, process, automation and suppliers. It’s an ambitious goal to tackle everything at once, but it’s seen as the fastest path to value. It’s notable that only 27% call acquiring and developing the right talent as a top priority. This may be a recognition that transformative change requires a holistic approach not just a focus on a singular dimension.
Cloud and data are the other twin priorities: Thirty-five percent are focused on infrastructure migration, 34% on data analytics and 28% on enterprise architecture. Given their interconnectedness, we’ll see more CIOs converging their activities here—investing, developing and managing both their data and cloud capabilities, along with AI, more holistically instead of as discrete areas.
While progressive CIOs are already acting in a strategic role, defining business and digital strategy alongside the rest of the C-suite, others have yet to make that impact. Thirty percent of CIOs in our survey indicated that they will focus on evolving the IT function to be a more strategic partner to the business. For those not yet a part of driving true innovation and growth, the time is now.
While cloud and data are top of mind for CIOs, they’re also looking at how emerging technology and trends can drive future growth. AI tops the list of those they see as very important to the company’s products and services strategy (61%). It’s a confirmation that AI is now viewed as a mainstream technology, one that they’re looking to leverage to create better customer experiences, improve decision-making and innovate products and services—the top three areas they’ll focus on, according to our annual AI survey.
Next on their list is digital identity (57%), 5G (56%) and IoT (54%). While each of the technologies on our list is notable and can underpin a company’s innovation strategy, in reality many of these will be used in combination with one another. And they’ll be more impactful that way. This is a development we’ve been tracking for the past decade: the convergence of technologies to power new business models.
In fact, the ultimate tech convergence is reflected in the metaverse—which 46% of CIOs say will be very important to their offerings. Today, cloud technology is addressing the processing power and storage to support extended reality and immersive interfaces. Hyperconnected networks that leverage 5G are nearing maturity. AI is helping to create digital reflections that combine computer vision, speech and deep learning to offer users experiences that feel real. The decentralization of finance and the economy, as supported by blockchain, is making partly automated financial systems possible. That 47% of CIOs are looking to blockchain and 43% to cryptocurrency as a driver of new products and services is especially notable. It underscores how the technology is moving from experimentation at the periphery to being viewed as a core building block to drive new business capabilities.
So while the metaverse concept has been in the spotlight recently, it’s more evolution than revolution. Many CIOs may be wondering whether and when to begin thinking about a metaverse strategy, but early movers are getting started now. The metaverse could profoundly change how businesses and consumers interact with products, services and each other. There are practical strategies companies can begin pursuing that will better position them for the future—even if the metaverse as envisioned by tech visionaries doesn’t fully come to fruition. Near-term actions include assigning resources to follow fast-moving developments; focusing on key foundational elements, such as application programming interfaces to make services extensible or recruiting talent in key areas like digital identity or assets; and testing the waters with lower-risk use cases, such as selling digital versions of physical goods or launching non-fungible tokens (NFTs) to enhance brand awareness.
Our latest PwC Pulse Survey, fielded January 10 to January 14, 2022, surveyed 89 technology leaders from Fortune 1000 and private companies, along with other C-suite executives, about business priorities, investment plans and concerns as they think about the year ahead. Find all of these insights in our PwC Pulse Survey.