Tech spend visibility to ease impact of economic uncertainty and inflation
This is a guest post by Pete Wilson, vice-president and general manager for customer success at Apptio Asia-Pacific
A new fiscal year has only just started, but the technology budgets that were locked in on July 1 are poised to look very different before June 30 comes around – perhaps even prior to 2022 wrapping up.
Like the rest of the world, Australia’s recovery will be long and uncertain as we endure the economic impacts of the COVID-19 pandemic, supply chain issues, a construction and housing industry in strife, the war in Ukraine, and the inflation resulting from these and other headwinds.
A survey of 22 leading Australian economists put Australia at a 20% probability for “an overreaction by authorities bringing on a recession”. Conducted by The Conversation, the survey forecasts cash rate to hit 3.1%, and inflation to climb to 7.1% this year.
As a result, despite the optimism that surrounds increased technology spend and rising IT budgets, it will be close to impossible for organisations to deliver everything their business needs now, and what it will need in a year’s time, with the funds they have set out for fiscal 2023.
Targeted cost control is therefore crucial. While it may have been possible for companies to get away ad-hoc studies, basic cost calculators, spreadsheets and time-consuming processes to manage their budgets in the past, current economic conditions demand a proactive strategy.
Without a sustainable and data-driven framework, organisations can’t establish nor maintain visibility and control over their spend.
Unfortunately, many lack the data to drive proactive decisions. Research from Harvard Business Review found only 62% are confident in the data they do have when making decisions around budget. This is perhaps why just a quarter are re-evaluating and/or renegotiating their IT supplier agreements to improve costs and flexibility.
This is testament to the fact that on average, enterprises are typically spending more on IT than they need to. In my experience working with multinationals operating down under and successful ASX-listed organisations right through to fast-scaling start-ups, there is room to bring down cloud costs by 25%, reduce vendor and SaaS (software-as-a-service) spend by 10%, and save about 5% on total consumption (or subscription) spend.
CEOs, tech chiefs and finance bosses need to collaborate to continuously refocus, replan and reinvest technology investments. This will allow them to avoid wasting funds and reduce costs in the right places, and subsequently preserve their ability to innovate by reallocating resources to high value initiatives.
Proactive cost management creates granular visibility into IT spend, segmented by the full spectrum of influences: vendor, initiatives and projects; run versus change costs; and consumption by business unit. It also analyses trade-offs across different planning scenarios, allowing decisions to be made much faster, and enabling rapid responses to changing and turbulent market conditions.
This lays bare what spend can be cut back or ditched altogether, and protects investments that deliver the best return. Common examples include telecommunications bills which remain bloated due to an excess of unused data and roaming charges, and expansive SaaS investments that haven’t yet been reconciled.
Interestingly, a large, ASX-listed financial institution operating in the Asia-Pacific region could find and cancel 1,200 unused or excess service numbers in the first 30 days of taking proactive steps in managing IT spend. This was followed by a 50% reduction in time to answer ad-hoc questions about costs, 2% annual public cloud cost savings, and reduced invoice validation times.
A report from Equinix revealed 56% of Australian IT leaders are accelerating their company’s digital evolution as a result of Covid-19, and 53% have bumped up their budgets to do so. The same research noted a desire to innovate with advanced technologies including 5G, internet-of-things (IoT) and Web3, while 69% are chasing the everything-as-a-service dream.
Fundamental to innovation amid adversity means reducing investment clutter and reallocating resources to opportunities with the highest returns. The right investments expedite digital transformation and create new revenue streams to maximise the outcomes IT budgets stand to deliver.
As our economy battles challenges ahead, Australian business leaders need to make intentional, data-driven decisions that lead to long-term success. Rather than giving in to the temptation of cutting costs across the board, creating visibility into how business units consume technology allows for strategic, smart decisions to eliminate waste, and redirect funds to initiatives that will mitigate the impact of economic uncertainty.