How should Latin American CIOs manage the impact of inflation and dollar fluctuations on the economy?

We have seen the current crisis develop in stages. It started with the pandemic, followed by the shortage of chips for all kinds of machinery and equipment, and it escalated with the container crisis and the global supply chain.

In addition, the hydrocarbon, fuel and food markets were destabilized with the Russian invasion of Ukraine, which further aggravated the problem of unemployment and inflation that had already arisen. All of these issues are occurring on an unprecedented global scale.

Another example is the concern over cyberattacks that have damaged businesses, infrastructure and countries like Costa Rica in recent months.

In Latin America, we must add a significant devaluation of the most important currencies such as the Argentine, Colombian and Chilean pesos and the Brazilian real, dragging the continent into uncertainty about what to buy, what to use and how everything finance from software. and cloud services to machines and infrastructure.

The real dilemma is how to leverage business with technology and deal with volatile costs, at least for IT decision makers.

IDC, in its State of the Market: Impact of Inflation on IT Spending and Cloud Studyabstract:

  • Underlying demand from businesses and service providers for IT investments remains strong. Supply is a critical constraint to near-term market growth, including infrastructure investment.
  • Consumer spending is showing early signs of the negative impact of inflation on the global economy, as well as supply chain disruption. IT services may be affected by increases in labor costs.
  • IT managers around the world anticipate that general inflation and industry supply chain issues will alter cost assumptions, but are considering increasing their ICT budgets rather than delaying technology investments.

So we asked three experts in the field to give us their perspective on this prospect.

Alberto Samuel Yohai, President of the Colombian Chamber of Computing and Telecommunications

Alberto Samuel Yohai, President of the Colombian Chamber of Computing and Telecommunications

We have made significant progress in recent years in Latin America from the point of view of creating CISO in companies and public and private entities of all kinds.

Undoubtedly, this new role will become increasingly important and more relevant to ensuring overall success by increasingly protecting information security.

Given the current economic situation around the world, particularly regarding the strengthening of the US dollar, it is now more important than ever to have the right people with the skills and knowledge necessary to make the most of the resources available to them. technology investments.

It is a reality that most products and services related to information and communication technologies are and will continue to be in dollars or other local currencies, given the current exchange rate.

Therefore, the various sectors of companies and public entities will need to quickly understand which technology-related projects will protect customer and supplier information and which processes can mean the life or death of the organization.

For example, boards of directors and their equivalents in the public sphere will need to be increasingly aware and committed to investing in the technologies needed to secure their future. This is because we are seeing more and more cases around the world that prove that there is nothing more dangerous and possibly more expensive than saving on technology and falling victim to a cyberattack.

Likewise, professionals in other fields such as finance, for example, are tasked with finding creative solutions to materialize technological needs at all costs.

As we achieve widespread awareness of this reality across the value chain, regardless of industry or economic activity, the overall ecosystem will be safer and we will all ensure on top of each other.

From the Colombian Chamber of Information and Telecommunications Technologies, we will always be ready to support the essential work of continuing to increase knowledge related to information and communication technologies in the country.

Alain Almeida, Senior Partner in Technology, Media and Telecommunications, KPMG Colombia

Alain Almeida, Senior Partner in Technology, Media and Telecommunications, KPMG Colombia

We see several issues to be addressed in the current situation regarding dollar consumption and inflation affecting us globally. We need to do more granular technology contract management, i.e. review all dollar purchases made under flexible or elastic consumer contracts (typically cloud services).

It is also essential to identify contracts with limiting conditions that involve significant changes in consumption rates in order to be able to monitor and establish operational strategies in the face of consumption peaks that may affect budgeted amounts.

Another important consideration is the need to verify the full utilization of unused installed capacity which today more than ever is an obligation, as well as to seek options to eliminate this inactivity or to make a creative examination of its possible uses. , connecting other strategic partners to the discussion on financing and collectively exploiting these capabilities.

The renegotiation of consumption tariffs linked directly to the dollar has always been an option in this market. When it comes to the long-term supplier-customer relationship, we need to be ready for it and make long-term commitments with reliable suppliers who will invest in the relationship in times of crisis.

If we are about to negotiate new licenses, it is essential to review existing local cloud options with local currency payments.

Involving the technical team in the discussion is also essential. Optimizations that save compute and storage time come not from the procurement committee but from highly skilled technical staff motivated to operate flexible infrastructures with a clear focus on resource optimization.

ESG factors are being embraced by many companies around the world because consumers are demanding more sustainable, user-friendly and better-managed processes, emphasizing new formats that show the true purpose of consumers in these times of financial stress: lower price without loss of quality.

Among the aspects analyzed, 88% of Latin American business leaders are confident in the next three years for the economy of the countries where they are located, while 84% in retail and consumer trade have the same perception. This leads to the inference that even with political and international changes and situations, there is confidence in economic growth.

Alejandro Floreán, Vice President Consulting and Strategy, IDC Latin America

Alejandro Floreán, Vice President Consulting and Strategy, IDC Latin America

Latin American executives are generally distinguished by their resilience, their great capacity for work and their success in difficult circumstances. Despite the obstacles, companies are continuing with their digitization initiatives and IDC sees them moving forward with their plans in this regard.

IT development in Latin America has a 6.5% advantage over economic growth. While economic growth of around 2.4% is expected, the enterprise IT market is showing comparative growth of around 10%. For example, in the enterprise market alone, the figure is higher than the average increase in technology investments, which places technology as a key factor in the region.

IDC observes that each country has defined specific policies regarding international trade. At present, the way they manage budgets and contracts describes the situation of the company in the face of the last global economic crises and the need to continue their efforts and the journey of digital transformation.

The good news is that despite concerns about inflation, IT investments in Latin America are building confidence. 41% of enterprise IT budgets in the region are higher in 2022 compared to 2021, while only 11% of organizations plan to spend less.

Insight and strategy are the keywords for businesses to evolve into digital-first status, becoming customer-centric organizations from within and beyond.

Advice for CIOs in Latin America:

  • Businesses need to look inside their organizations to assess and maintain a complete view of their IT strategy and platform, eliminate all unnecessary and wasted resources, and gain visibility into spend.
  • Review contracts and their policies to renegotiate them if necessary. Evaluate pricing requirements and flexibility when old contracts reach end of life.
  • Also consider the impact of adjacent costs such as energy, warranties and service availability. It may make more sense to pay today for more flexibility tomorrow. Service providers and suppliers should offer skills to help weather future crises and inflationary pressures.
  • Strategies, plans, and budgets should include long-term talent capture and upgrades to keep workers current. Consider this, especially in IT security, cloud engineering, DevOps, and other technologically demanding fields. Also, seek out partners, managed services, and other specialized professional sources for projects hampered by cost and delays.

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