HOW CONFIDENT ARE YOU IN MAXIMISING TECH INVESTMENT RETURN?
A recent survey by Flexera shows respondents estimate that 12% of their technology spend is wasted. Further research by Flexera and industry experts put the amount of waste at 30% or higher.
For an organisation with an annual IT budget of £200 million, this could mean as much as £60 million wasted yearly. Identifying and eliminating waste is an increasing focus for IT Leaders and achieving a decrease of just five or 10% can free up a lot of money for activities that create value for the organisation.
OPTIMISE YOUR IT SPEND TO FUND TRANSFORMATION
The biggest challenge to spend efficiency is visibility – this was cited by 61% of respondents. The large number of manual processes represents a significant challenge to effective spend management. Tackling these challenges can have a significant impact on the bottom line and help enable IT Leaders to fund transformation initiatives.
Having clear visibility on IT spend, enabled by automated processes to capture spend data, including spend by Application and ‘What if’ scenario planning, is a key enabler for IT Leaders to make informed investment decisions.
WHERE IS THE MONEY GOING?
Digital transformation, cybersecurity and cloud-first/cloud migration are the top three initiatives cited by respondents. These large-scale projects require substantial technology investments, leading to significant budget pressures as costs increase and organisations look to reduce budgets.
The average IT spend of respondents is just above 8% of revenue and IT headcount represents nearly 14% of the workforce. 56% of respondents plan to increase their IT spend in 2021 largely due to the significant changes in how organisations operate in response to the Covid-19 challenges.
SPEND OPTIMISATION CHALLENGES
IT organisations have been under pressure for years to drive efficiency and cut costs, and that pressure is still on. Uncovering and reducing waste is critical, so investments can be reallocated to critical initiatives such as digital transformation, cybersecurity and cloud.
The Flexera survey results show a disconnect between respondents’ estimates of how much IT spend is wasted (12%) and the actual wasted spend (30%). This disconnect could be due to an overly optimistic view from the respondents when they assess their ability to control waste. Actual independent or tool-based measurements of wasted IT spend typically uncover larger amounts of hidden waste.
HOW TO APPROACH SPEND OPTIMISATION
For IT organisations that face flat or decreasing budgets, improving spend efficiency can make a huge difference in IT’s ability to meet business demands for delivering new services at a faster pace.
CIO-OFFICE recommend adopting the following steps as a starting point to gain clarity and control of IT spend:
- Adopt a Spend Analytics tool – Ensure you have a full breakdown of all your external IT spend.
- Complete a Spend Efficiency review – Once you understand exactly what you are spending, you can Scrutinise, Economise, Rationalise and Commercialise.
- Benchmark to ensure competitiveness – Having an external independent view on cost, performance and terms and conditions, can provide extremely effective leverage.
- Negotiate from a position of knowledge – Have empowered discussions with your suppliers and stakeholders, enabling you to make data-driven decisions.
The most effective IT Leaders are always those who understand the total cost to deliver IT, enabling allocation to business consumption. Using these insights they know where to eliminate waste and what levers can influence business behaviours.
Once the true cost of IT is known and efficiency opportunities are understood and enacted, this enables IT leaders to transform their business with self-funded IT transformation.
KNOWLEDGE, EXPERIENCE, METHODOLOGIES, AND ACCELERATORS
CIO-OFFICE provide industry experts and solutions to optimise IT Spend and Performance. Our team deliver Insights, Services and Assurance to enable organisations to get the most from existing investments while reducing risk and cost.
We have improved the results of every organisation we have worked with.
If you would like further information or help with IT Spend and Performance, please contact us at info@cio-office.com.
