Why companies should prioritize IT cost optimization in 2023
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 adopting a cost optimization mindset.
Considering 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 a year ago. And one area of spending 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 a clear understanding of their IT spending. At Crayon, we believe companies should focus on optimizing costs rather than unnecessarily spending. For instance, spending $700,000 instead of $1,000,000 for the exact requirement can represent significant savings.
All too frequently, we hear of vendors selling more products to customers by offering discounts. But why pay for more than what you require? Due to vendors' tactics, there is often a significant difference between what companies need and what they buy.
Globally, 95% of businesses believe there is room for improving their IT spending. Indeed, only a little over half of all leaders clearly understand their IT spending.
The result is that 89% of businesses are now more focused on optimizing these costs than in 2022.
They are scrutinizing investments from a business value perspective, establishing new governance systems, and getting the external help they need.
Here we share data from The State of IT Cost Optimization in 2023 report highlighting three key trends. We encourage you to read the full report to dive deeper into how businesses approach this complex issue.
IT cost optimization is a team sport
Looking at the data, it quickly becomes apparent 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 the spending on software and the cloud through various departments.
This complexity has led some businesses to establish specific teams dedicated to optimizing IT investments differently. For instance, 62% of companies worldwide have a FinOps practice, 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 becomes the norm in most enterprises remains to be seen. But what's clear is that leaders realize 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 most challenging thing about managing an IT estate today.
The challenge isn't so much a lack of formal structures. 83% of businesses already use a framework and transparent guidelines to optimize costs.
The problem is that leaders lack time to coordinate with one another and lack the knowledge of internal spending and technology market trends to ensure they're constantly 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 helpful IT cost optimization measure is moving forward.
For leaders of different departments to work well together, businesses need tools and processes to foster greater clarity of organizational needs and greater transparency around allocating resources.
Most businesses are seeking help
87% of companies 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 accept that they don't know what they don't know and need to formalize support to implement better IT cost management across the organization.
Most businesses (40%) are engaging external support to optimize their cloud spend (a cost-saving approach three times as popular as downsizing).
Having the correct skill set and knowledge is essential. So they're also engaging these partners for help understanding their own organizations' needs and spending patterns and 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.
Making IT cost optimization a priority
When asked about the prevailing economic climate and how it might affect their technology spending moving forward, most leaders believe they will continue spending in 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 undergoing to become more competitive and operationally resilient.
But as this reliance on technology grows, so 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 well aware of the challenge and taking essential steps to find the right balance between efficiency and cost towards establishing a more optimum future.
To find out what measures businesses are adopting to optimize IT costs, read The State of IT Cost Optimization in 2023
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