Prioritize IT Cost Optimization
Learn why optimizing IT spend is essential and how to take control of your tech costs.
Prioritize IT Cost Optimization
Learn why optimizing IT spend is essential and how to take control of your tech costs.
In the same way that a control tower monitors and directs air traffic to ensure efficient use of airspace, businesses are scrutinizing their IT spending to improve their overall cost optimization.
The State of IT Cost Optimization in 2023 report provides insights into how businesses are approaching this complex issue and finds that nine out of 10 businesses now consider optimizing their cost structure to be a high priority. 87% of business leaders now report they’ve adopted a cost optimization mindset.
When you consider the challenges, these leaders have faced over the past two years – from global, macroeconomic turbulence to local skill and supply issues – this shift makes sense. Businesses are navigating a very different environment today than they were even a year ago. And there is one area of spending that is drawing their attention: IT costs and how they must gain 360-degree visibility into IT infrastructure and operations to track key performance indicators.
Indeed, only a little over half of all leaders even have an exact understanding of their IT spending. At SoftwareOne (formerly Crayon) we believe that companies should focus on optimizing costs rather than just spending unnecessarily. For instance, spending $700,000 instead of $1,000,000 for the same requirement can represent significant savings.
All too frequently we hear of vendors selling more product to customers by offering discounts. But why pay for more than what you require? There is often a significant difference between what companies need and what they end up buying due to vendors' tactics.
Globally, 95% of businesses believe there is room for improving the way they spend on IT. Indeed, only a little over half of all leaders even have an exact understanding of their IT spending.
The result is that 89% of businesses are now more focused on optimizing these costs than they were in 2022.
They are scrutinizing investments from a business value perspective, establishing new systems of governance, and getting the external help they need.
IT cost optimization is a team sport
Looking at the data, it quickly becomes clear that IT cost optimization is not just IT’s domain.
Most businesses leave the responsibility of IT cost management to the IT department or finance. But at the same time, most also distribute spending on software and the cloud through various departments.
This complexity has led some businesses to establish specific teams dedicated to optimizing IT investments in different ways. For instance, 62% of businesses around the world have a FinOps practice in place and 77% have a software asset management discipline in place.
Indeed, 11% of businesses have set up dedicated teams to take complete responsibility for IT cost management.
Whether this goes on to become the norm in most enterprises remains to be seen. But what’s clear is that leaders are realizing the only way to sustainably optimize IT spending is by engaging and coordinating people from all over the organization.
Most leaders are facing unknown unknowns
For the second year in a row, respondents to this survey voted IT cost optimization the hardest thing about managing an IT estate today.
The challenge isn’t so much a lack of formal structures. 83% of businesses are already using a framework and clear guidelines to optimize costs.
The problem is that leaders lack the time to coordinate with one another and simply lack the knowledge of internal spending and technology market trends to ensure they’re always making optimal decisions.
Nearly half of all leaders report they do not have an exact understanding of their IT spending.
And why most respondents voted for the ability to measure IT utilization by users as the most useful IT cost optimization measure moving forward.
For leaders of different departments to work well together, businesses need tools and processes that can foster greater clarity of organizational needs and greater transparency around how resources are allocated.
Most businesses are seeking help
87% of businesses worldwide are working with external consultants to help them optimize their IT spending and, notably, 64% are working with IT-specific consultants.
Interestingly, when asked why they’re working with external consultants, three in four businesses cited they were doing so for some specific knowledge.
More and more leaders are accepting that they don’t know what they don’t know and that they need formalized support to implement better IT cost management across the organization.
Most businesses (40%) are engaging external support to optimize their cloud spend (an approach to cost saving that’s three times as popular as downsizing).
Having the right skill set and knowledge is essential and so they’re also engaging these partners for help understanding their own organizations’ needs and spending patterns, as well as gaining a better understanding of the tech market.
In either case, most businesses realize that the key to filling these knowledge gaps and implementing better IT spending protocols often starts with getting help.
A new imperative
When asked about the prevailing economic climate and how it might affect their technology spending moving forward, most leaders believe they will continue to spend in both the short and long term.
That is good news for the technology industry. And in some ways, it validates the rapid digitalization so many businesses are currently undergoing to become more competitive and operationally resilient.
But as this reliance on technology grows, so too does the complexity of managing all these costs. It requires a thorough understanding of the company's needs, identifying what they have, and applying technical capabilities to achieve cost efficiency and avoidance.
This research suggests most leaders are both well aware of the challenge and taking important steps to find the right balance between efficiency and cost towards establishing a more optimum future.
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