By Sanjiv Sachdev, Director, Strategic Business Value Consulting at Serviceware
As business leaders emerge from the ashes of pandemic firefighting, they now have their eyes firmly set on growth and the tools and technology needed to succeed and transform. Understandably, many are getting caught up in the desire to accelerate digital initiatives and rapidly invest in the vast amount of shiny new technologies on offer. But where is this budget going to come from?
Despite a focus on the road ahead, each and every investment still faces increased scrutiny from those sitting around the c-suite table. Businesses have had a lot to contend with in the past few years: the pandemic, fuel disruption, inflation and supply chain hold-ups to name just a few. For the services sector, in particular, a steep rise in operating expenses has left the CFO’s purse strings tighter than ever.
To overcome this, business leaders must focus on cost transparency and understanding where significant cost savings can be made, rather than looking to lose valuable experienced resources. But it’s not necessarily about downsizing; it’s more about ensuring resources are being utilised effectively and efficiently across an organization which will subsequently help fuel business growth. For example, there is no point in overspending on software licenses if they are not being used by employees or underspending and getting hit by a software audit and penalty fees. Instead, it makes better business sense to invest in tools that drive value. It’s also important to consider not over stretching resources to the point of snapping, as this can have an adverse effect on a business, both in the short-term and long-term.
Why rightsizing is the answer
A better approach is rightsizing. Whilst downsizing is about reduction, in contrast, rightsizing is about being more strategic, streamlining operations and taking an end-to-end view across an entire IT portfolio. This may mean minimising costs in one area but investing it elsewhere, to position the organization for future challenges and opportunities. Most importantly, it is about achieving growth rather than scaling down. According to Bain & Company, companies that ‘right size’ their workloads can cut costs by as much as 30% to 60%.
Achieving such figures, however, requires even greater collaboration across departments and for CIOs and CFOs to work closely together to review their current IT estate. Dan Garvey, vice president in the Gartner Finance practice, comments “CFOs are trying to figure out the digital landscape and ways to identify and execute cost savings opportunities in order to allocate more funding to digital initiatives”. It can often be considered a challenge for the CIO to find the right balance between operations and innovation, especially as they are often expected to lead product innovation, reduce spending, and also accelerate global expansion. In this world, CIOs must be smart about how their departments are purchasing and using technology.
The problem is that it isn’t necessarily straightforward to rightsize without having accurate analytics to guide both the CIO and CFO. But the c-suite needs to invest in the company they are envisaging for the future, rather than for the one that exists now. Inevitably, this requires forethought, and clear, transparent planning.
Remember that visibility is key
IDC predicts that digital transformation spending will grow to more than 53% of all information and communication tech investment by 2023, and as a result is now accounting for a substantial percentage of budgets. It’s therefore key to understand usage, performance and cost levers in real-time, in order to make the right investments and vendor choices as part of this futureproofing, transformative strategy.
Traditionally, most companies would use tools such as Excel as a way of managing their IT costs, but due to the manual nature of spreadsheets these pose a risk to data integrity and therefore should be avoided. Spreadsheets not only carry the risk of human mistakes, but they are also impossible to keep up to date at all times. Luckily, there are specialised tools for IT Financial Management (ITFM), which can simplify and automate the data-gathering process for businesses.
Such tools enable organizations of all sizes to gather vital, real-time operational, project and vendor cost data. This also allows the CFO and CIO to develop fact-based scenario planning and effective decision-making – from rightsizing to investing in the future. Cost-data alone, however, is not enough to right size effectively. Utilization data is a key mechanism for rightsizing. Whilst, insights into the value derived from such investments is also important, IT Financial Management (ITFM) software can provide greater visibility and understanding of all IT service processes, including how IT is or isn’t being used and by who. Through greater transparency, these tools can ensure that innovation and digital strategies take centre-stage in optimizing services and paving the way for a successful business future.
Invest in a better future
Businesses can no longer put their head in the sand when it comes to their next phase of growth. Organizations need to invest wisely in their digital capabilities so that they not only perform and build resilience to survive the ‘now’, but also to pave a way for the future. Investment in technologies such as cloud-based services is crucial to allow businesses to reduce internal costs and optimize business growth by offering a much more scalable and reliable IT infrastructure. ITFM is the software of choice for financial planning and evaluation of IT. It not only helps businesses to measure Infrastructure as a Service (IaaS) sourcing progress but also manage ongoing cloud spend.
Rightsizing budget spend to fund reinvestment in these innovations will be paramount to success. It’s important now more than ever to be willing to be transparent and visible in the IT space, otherwise you risk being left behind and losing valuable time in the transformation race.
