For most businesses, picking software platforms was yet another process upended by COVID-19.

Software adoption projects were paused altogether due to a mix of funding and staffing constraints. For others, the need to sustain operations through peaks in demand made software a top priority. Organizations needed to push past the slump of the pandemic while retooling core processes and adapting to a distributed work reality.

In the past three years, CIOs have aggressively adopted software as a service (SaaS) tools, a market which doubled in size over the past three years and swelled to $101 billion in 2019, according to data from Synergy Research Group.

But a reckoning on how to quickly provide value to customers placed software budgets under scrutiny, as finance chiefs tightened the reins and focused on overcoming the economic downturn.

Almost one-quarter of CIOs cited totally frozen budgets in May, according to Pulse data. Those still investing in software platforms quickly shifted spending priorities toward the security and collaboration spaces. 

Moving forward, a broader pivot is expected as business leaders task software solutions with helping them improve efficiency and deliver value to customers.

January 2020

At the start of the year, leaders with purchasing power asked questions about efficiency and staff retention as businesses sought to compete.

Software spend in prior years focused primarily on internal business operations and how those platforms could enable digital transformation, said Ryan Talbott, chief transformation officer at Altimetrik, in an interview with CIO Dive. 

The focus on digital transformation was about leveraging the software that let companies redefine where they provided value, and how tech could transform what that value was. 

With collaboration tools, leaders sought more efficiency in their workflows. Low-code tools let businesses reduce deployment time on internal software needs. Leveraging software bundles from Microsoft or Google, companies kicked the year off looking to bring physical processes to the digital realm.

In January, many companies had "a desire to continue down a path of digital transformation," said Matthew Hopkins, intelligence analyst at CB Insights, in an interview with CIO Dive. Though there was traction in adoption of collaboration tools, they were more of an afterthought for CIOs.

Business decisions under COVID-19

In the COVID-19 era, business survival came first. Continuity became a guiding principle for CIOs, whose peers in the C-suite relied on them to maintain business operations.

There are six key software categories businesses prioritized during the pandemic, according to Andrew Bartels, VP and principal analyst at Forrester.

• Security and security software
• Risk management
• Customer engagement and experience
• Multichannel platforms
• Work-from-home-enabling software
• Employee experience

As the effects of the pandemic play out, these are the areas where businesses can expect to sustain investments.

Between May and July, CIOs expected to shift investments into internal communication and collaboration tools, mobile security and customer communication and collaboration tools, according to Pulse data.

In search of key platforms, will managers turn to the crowded SaaS market? Businesses are "building for differentiation, but they're buying for parity," said Talbott. 

CIOs are likely to adapt the set of software tools that will make them competitive, then rely on internal resources to build the capabilities that lets them stand out in their industries.

2021 and beyond

The key factor impacting 2021 software priorities is uncertainty.

CIOs right now have to plan for two scenarios, according to Bartels. In the first one, if the pandemic lets up, there may be an uptick in the economy that can allow for a more comfortable recovery.

"But if the virus comes back, if the vaccine doesn't happen, if there's no second stimulus, if consumers still remain huddled in their houses, then we [have to] prepare for much worse," Bartels said. These outcomes will shape the budgets CIO must operate with.

With a 60% likelihood, Forrester projected tech spending would drop 9% this year and another 5% in 2021, pointing to a slower recovery across industries.

More than specific software categories for investment, in 2021 CIOs will devote resources to deciding what to cut or defer, starting with capital-intensive overhauls of core systems.

How priorities shifted

The state of each industry dictated how sharp the turn was after COVID-19.

The financial services industry had a relatively easier time adapting to the shifts in demand than fields such as healthcare, which grappled with the effects of a once-in-a-generation public health crisis.

Any effort industries devoted to digitizing processes paid off amid the pandemic, according to Hillary Ross, managing partner and leader of WittKieffer's Information Technology Practice. 

"It pushed the [healthcare] industry forward by a decade," said Ross.

Regardless of their field, tightening budgets mean CIOs are looking for a clear return on investment when it comes to software. "Innovation for the sake of innovation is too expensive right now," said Ross. Any tool adoption initiatives will need to be "tied to strategic goals."

The impact of the pandemic thrust CIOs into "a more reactive position," moving their sights away from any roadmap they might have started the year with, said Hopkins.

In adjusting to the changes in the business landscape, CIOs "increased their resilience by moving certain workflows to the cloud," leveraging cloud-based apps to a greater extent than previously, he said.

With a sharper focus on cloud-based apps, alongside the pivot to distributed work, comes greater security exposure. Workers will be processing company data from consumer-grade connections, which limit visibility of the central IT organization.

The pivot to a new operating model defines the difference between software priorities in years past and what they became amid the pandemic, according to Bartels. "We've now had to move to a world of more virtual engagement, more remote activity, because of the closing of physical locations," he said. 

"At this point, it's more how they survive," he said. "Thriving, in many cases, isn't really on the table."

Trend to watch: 

As collaboration tools become table stakes in the software space, there's potential for software makers to turn the increase in attention into a greater expansion within enterprise. Collaboration vendors are trying to grow their platform's integrations with other business applications, Hopkins said. Now, the challenge is for these platforms to become something larger.

"I'm sure that's certainly the aim," Hopkins said. "But there's certainly a question as to whether they're actually able to be anything more than a communications platform.”