IT Development in Travel: Budgeting for IT Projects in 2021

Statistically, IT budgets for the financial year 2021, at least in the travel and hospitality companies, have been reduced by a staggering 50 to 80%. How to budget for IT projects in an environment with low revenue and high uncertainty? Can a company keep core projects going, maintain all applications and, at the same time, innovate? It is challenging but certainly possible.
4 min read
16/02/21
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By Vasily Malinov
Vice President, Travel, Transportation & Hospitality
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IT Development in Travel: Budgeting for IT Projects in 2021

I would like to propose a few practical ways that I believe can empower any executive to address some of the challenges faced in this type of business environment.

The financial reality is that travel, transportation and hospitality companies have suffered massive revenue losses last year and are just barely starting to recover. Inevitably, this has caused a slash in IT budgets. The challenge for CEOs and CTOs is now to find ways to keep existing core projects on track, but at the same time innovate and grow. Innovation through designing new products and services always enables companies to stay ahead of the competition and remain relevant to their customers. How may all this be achieved with an austerity budget reduced by 50 to 80%? It is the challenge and the problem to be solved.

Elastic IT

One thing that large technology consultancy companies usually lack is elasticity. Ramping a team up and down is very difficult, slow and very costly for them. This is why, the majority of big service technology companies with 5000+ engineers usually prefer to commit to multimillion dollar projects that span over several years. In this way they can amortize any churn and losses.

Such large projects that they prefer to take, in the current market situation, are simply becoming very rare as they are no longer feasible. Here is why. The IT budgets as I mentioned before, are simply not there anymore. Besides, we all know that large projects are very risky due to their length in time, unknowns and the rapid change in technology.

How to Budget for IT Projects

The best way to budget for IT projects in 2021, from my experience and in my humble opinion, is to select only small, innovative and high-impact projects. Plus, to reduce any risk of failure even further, it is advisable to run them in collaboration with trusted, elastic IT outsourcing companies. These selected projects have to be executed in several quick iterations, must have a short time to market but, at the same time, a big impact on your business. From recent conversations I’ve had with travel industry executives (one of them from a large hotel chain), I concluded that enterprises are not looking for the “cheapest price” bidder anymore that can work on large projects, which may or may not succeed. Rather, companies are looking at IT projects from a ROI prospective with 3-6 months’ turnaround, which are easier to fund and manage, making them far less risky. With such approach when selecting a technology partner, innovation and expertise is more important than cost per resource. At the same time, ROI-based approach helps stakeholders be very effective with budget spent.

The overall concept is to still use the IT budget whatever it is but make the most out of every dollar or euro spent. I find that many travel and hospitality companies are ready to pay what is worth (in terms of hourly rate) to competent IT contractors that can produce high-impact solutions rapidly and reliably. Innovation and expertise this year are the top criteria and are definitely trumping the price. Cheap, underperforming, often big outsourcing companies work slow; they are mostly order-takers rather than problem-solvers. They are likely to be replaced with smaller, experienced contractors that can deliver results and innovation fast!

The unprecedented but expected fall in revenues and the current uncertain market situation means that there is simply no budget left for large projects in 2021. Decision makers would rather preserve whatever funds are available and wait until the global situation improves and then invest in any new and larger initiatives. This seems like a logical and right thing to do for now. This is why I believe the Elastic IT model is so relevant for today. This means that travel and hospitality companies request from their technology contractors only the amount of resources they need and when they need them. This translates into little to no waste of budget and maximum efficiency and output.

Let us recap some of the ways executives from travel and hospitality companies can budget for efficiency, business impact and value:

  • Prioritise smaller, more business impactful projects
  • Engage IT consultancies that provide agility and are flexible in providing the resources you need
  • Give priority to IT consultancy companies that have a portfolio of projects in the industry and that are able to complement tech expertise with real travel and hospitality industry knowledge. Therein lies the real value to you and to your company.

In 2021, when planning for the IT budget, the travel and hospitality executives will likely:

  • prioritise projects that accelerate customer acquisition
  • invest in initiatives focused on innovation
  • fund any initiatives that automate and streamline internal processes
  • allocate capital for the customer loyalty programs.

All these investments will be reflected well in the ROI and mid-long term revenues. In summary, what we have just described is the idea of having a lean budget with high value and impact, a budget that will not hinder growth and innovation, but which will definitely get us through these uncertain times.

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