CIOs: The View From the Trenches

The Chief Information Officer, or CIO, has a unique perspective into transformational enterprise trends. It is their responsibility to set and lead technology strategy across an enterprise. To understand this viewpoint, we surveyed 30 CIOs from leading companies across various industries to understand their priorities, where they’re investing in technology and how the pandemic influenced their business for the long term.

The best of remote work is here to stay, but in-office is coming back.

The pandemic drove many enterprises to remote work. The majority of companies increased their investment in remote work infrastructure. 92% of surveyed CIOs said that the pandemic accelerated their firms’ digital transformation.

Q. What are the effects of the pandemic on technology adoption?

As enterprises firm up their return to work plans, nearly 58% of survey participants believe that a 50/50 mix of in-office and remote work is likely for the foreseeable future. Not a single person surveyed believed that the future of work would be completely in-office or completely remote. As a result of this fast emerging trend, CIOs are seeking tools that can make this shift more efficient and safe. Menlo’s portfolio company Envoy has made the transition back to work much easier by introducing a reservation system for hot desking and a contact tracing solution. Another challenge facing executives is how to provide the same quality experience for both remote personnel and those in the office. Menlo is an early investor and believer in Teamflow. Teamflow bridges the divide and creates an environment of utmost collaboration for employees no matter where they are. Replicating watercooler conversations is easier said than done and Teamflow has artfully made that possible.

Q. What do you think the future of return to work (post-vaccine) will look like?

CIOs view the antagonizing relationship between remote collaboration and data security as a ticking time bomb.

When quizzed on what their primary technology focus was nearly two thirds (62%) of CIOs pointed to security. This hardly came as a surprise when new headlines are being made daily and for all the wrong reasons. This year, big security breaches made headlines. We witnessed the SolarWinds breach that rocked governments and businesses around the world. Colonial Pipeline fell victim to a ransomware attack which disrupted the supply of gasoline, diesel and jet fuel. JBS, the world’s largest meatpacking company, also fell victim to a ransomware attack, disrupting supply and operations around the world.

Q. What are up to three of your technology areas of focus?

CIOs believe security threats are directly correlated to the macro-trend of cloud adoption. In fact, API-based attacks (think SaaS integration vulnerabilities) have been growing in parallel with cloud technology adoption. 

Increasingly, remote workforces create new attack vectors and security risks: new computers, new Internet networks, and new applications, to name just a few. This expands the modern attack surface and increases the risk of data breaches.

We see a generational opportunity for security companies that are particularly focused on securing identity, applications and data. It’s why we’ve backed companies like Abnormal Security. With a large subset of the workforce now being hybrid or remote the attack surface has increased. Abnormal Security’s agentless platform allows enterprises to prevent a potential phish or ransomware attack from reaching the endpoint. This decreases the potential from a bad actor threat from reaching employees.

As office space goes down; cloud costs go up.

The move towards a blended in-person/remote workforce has led many companies—including Yelp, Twitter, Facebook, and Salesforce—to decrease their physical footprint. They no longer need as much real estate as they had pre-pandemic, as confirmed by nearly half of CIOs surveyed. Companies are opting for many satellite offices rather than a larger HQ. Another Menlo-backed company, OpenSpace, gained significant adoption from corporates that are looking for innovative ways to do space planning and mitigating construction risk.

Q. Has your company reduced its real estate footprint within the past year?

The cloud comes with a price, and remote work has had a blank check.

The reduction in real estate has led to an increase in cloud spend. Cloud services have proven critical in this remote work era: dispersed employees can collaborate in real-time, applications are more accessible and a scalable cloud can grow and manage the increasing demands of processing, networking and infrastructure.

In 2020, firms largely had to do whatever it took to keep their businesses running; the checkbook was open. However, this convenience comes at a cost. Nearly 60% of CIOs estimate that their cloud spend will increase 25% throughout 2021, and none of those surveyed predict a decline in SaaS costs. 

Q. How will your cloud spend change this year?

SaaS prices will also continue to rise as SaaS providers build new features and provide a more concierge, customer obsessed approach to serving their customer’s needs. 42% of CIOs report a 10% increase in SaaS prices over the past year.

Q. How have your YoY SaaS prices changed?

While many CIOs are adamant on cost containment solutions to avoid cloud costs increasing their overheads, cloud offerings are a particularly sticky product.  Moving to a lower cost solution isn’t always cheaper, as those transitions can cost an enterprise millions in disruption and lost productivity. 

CIOs expect to spend more on Cloud and SaaS overall, and will direct their dollars toward some unique areas.

Overall, CIOs prioritize needs over savings.  81% of CIOs said their IT spend budget is actually going to increase in 2021. Their spend management is more focused on redirecting dollars toward protecting their data fortress and seeking strategic advantages.

Q. What does your IT spend budget look like for the year?

At the same time, SaaS spend management companies will be important

In a world where everyone with a corporate card remote or in the office can subscribe to a tool that benefits their work, it can be easy to get tangled in a series of overlapping licenses, underutilized plans, and redundancy of tools overall – this naturally gets compounded in large organizations. SaaS spend management tools are becoming essential to companies both big and small. Our portfolio company Zylo is a good example. Zylo is a SaaS spend management platform that helps decision-makers understand how their organizations are actually using applications (or not), identify unused licenses, and avoid paying for redundant functionality across multiple platforms. Furthermore Zylo allows companies to decrease their vendor management risk by discovering and having visibility into their organizational vendor landscape.

CIOs frame the pandemic shakeup as an opportunity to reinvent archaic manual workflows

When asked which technologies will have the most transformational impact over the next few years, 50% of CIOs point to artificial intelligence and machine learning.

Q. Which emerging tech area do you believe will be most impactful in the next 2 years?

Aisera, another Menlo portfolio company, is a great example of a company that leverages AI to automate a specific workflow (service desks). Aisera helps organizations create efficiencies at the very human-intensive—but very automatable—basic support level by automating tier-one ticketing by leveraging Aisera’s state of the art conversational AI platform, which automates 40% to 70% of responses out of the box using unsupervised learning techniques. Another example is our investment in Observe.AI, a leading Contact Center AI platform that helps top brands get a semantic understanding of the calls to streamline their call analysis, quality assurance, and coaching workflows while transcribing every call with high accuracy. DevOps is also no stranger to trends changes. Code deployments have really shifted from analog to digital and as a result companies are deploying code multiple times per day rather than once a week. Companies are now more than ever relying on continuous deployment platforms. Harness is continuing to be the breakout leader in the world of continuous integration, continuous delivery, and continuous deployment (CI/CD) to allow engineers to deploy on-demand to production using fast, repeatable and safe pipelines. Disparate teams rely on technology to continuously deploy code, validate a successful deployment and ensure no disruption to their customers.

For startups building enterprise solutions, this is just the beginning.

(a) We see a huge opportunity for startups that make workflows more efficient or who build custom software to serve specific verticals and departmental needs.

(b) Remote and hybrid work are here to stay, and this new mode of work has brought with it a host of opportunities. Those that bring SaaS solutions to bear that serve collaboration, remote culture building, benefits, collaboration, onboarding, HR, have much to gain.

(c) Concerns around security will continue to plague CIOs. The cybersecurity market isn’t a winner-takes-all battle. The industry can support multiple sectors and players and shows no signs of slowing down.

From the outside looking in, the CIO is the stakeholder that aspiring software businesses need to persuade. Cloud, security and AI have likely been top of mind for CIOs for some time but this past year threw a unique wrench into the mix which we like to call the ultimate digital transformation accelerant (UDTA). At the start of the pandemic, we witnessed two years’ worth of digital transformation within the span of two months, and that trend has continued

At Menlo Ventures, we seek to understand the enterprise software market and get to the core of what best-in-class entrepreneurs need to do to win in this dynamic space.

If you’re an entrepreneur dedicating your days to building a solution to make life easier, more efficient, more secure, or more meaningful for anyone working in a post-COVID world, we want to hear from you!