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The evolution of technology, from cloud computing to decentralisation and now generative AI, has made IT environments more complex than ever. This complexity is creating significant challenges for IT leaders, especially when it comes to keeping costs under control.
These challenges are even more pressing in today’s uncertain economic climate, where managing IT expenditures is crucial. According to the latest Cognizant Cost Intelligence Report, businesses are finding it increasingly difficult to monitor and manage these costs, with visibility dropping from 73% in 2022 to just 57% in 2024. This loss of visibility doesn’t just make it harder to keep costs in check—it also risks undermining the strategic alignment of IT investments.
The shift in how businesses invest in and pay for IT has changed to more predictable, ongoing costs rather than large, one-time expenses, driven by the rise of cloud services and SaaS. While this shift offers more flexibility, it’s also introduced new challenges, like decentralised spending and the rise of ‘shadow IT,’ where departments purchase technology without IT oversight.
This lack of coordination can make it difficult for companies to track their tech spending and ensure it is aligned with their broader goals.
Our data highlights a growing disconnect between tech investment and business outcomes, with 65% of ANZ technology leaders struggling to link their IT spending to measurable business value. This gap often stems from a lack of integrated financial and operational data, making it tough to demonstrate a clear return on investment.
On top of these challenges, the added pressure to invest in AI and cybersecurity makes it even more difficult for businesses to manage expenses effectively and make investments that deliver the intended results.
The increasingly complex IT environment demands a fresh approach to understanding and controlling these costs.
Stepping back from these technologies isn’t the solution. In fact, cloud, advanced applications, and AI are essential for driving innovation and staying competitive. The real challenge is figuring out how to maintain control and visibility over these technologies to ensure they deliver value.
To address these challenges, businesses need to rethink how they manage IT. It’s not just about controlling costs; it’s about making sure that technology investments are aligned with strategic objectives. Here are some key strategies that can help:
- Simplify Technology Architecture: Streamlining IT systems can reduce costs and increase efficiency. By consolidating overlapping systems, retiring outdated platforms, and standardising core technologies, companies can make their IT environments easier to manage and gain clearer visibility into costs.
- Embrace Engineering Excellence: Implementing best practices in software development and IT operations, like DevOps and CI/CD pipelines, ensures that technologies are deployed efficiently, reducing the risk of costly errors and delays. This helps maintain control over new technology implementations, ensuring they deliver the expected value.
- Technology Cost Intelligence and Value Management: Create a comprehensive cost baseline model that reveals the nature of all technology expenses and their connection to business activities. This approach not only highlights inefficiencies in spending compared to industry peers but also enables organisations to confidently prioritise the right assets and activities, ensuring investments are directed toward areas that deliver the greatest value to both customers and the business.
- Workforce Partnering: Transition from buying labour hours to forming strategic partnerships with scaled technology specialists. This approach unlocks economies of scale, offers flexible capacity, enhances technical expertise, and aligns incentives with business value outcomes, ensuring a more dynamic and results-driven collaboration.
By adopting these strategies, organisations can regain control over their technology investments, making sure that every dollar spent adds value. Today, where technology is both a vital tool and a potential challenge, keeping a clear view of IT spending is crucial to manage costs and ensure long-term success.
George Evans, Head of Consulting, Asia-Pacific & Japan at Cognizant
Last Updated on October 9, 2024 by George Evans
