Business

Gearing up for growth amid economic pressure: 10 top tips for maintaining control of IT costs

Published

4 months ago

June 1, 2023

By Dirk Martin, CEO and Founder of Serviceware

Three years on from the pandemic and economic pressure is continuing to mount more than ever. With the ongoing threat of a global recession looming, inflation rising, and supply chain disruption continuing to take its toll, cutting costs and optimizing budgets remains a top priority amongst the c-suite. Amid such turbulence, the Chief Financial Officer (CFO) and Chief Innovation Officer (CIO) stand firmly at the business’s helm, not only to steady the ship but to steer it into safer, more profitable waters. These vital roles have truly been pulled into the spotlight in recent years, with new hurdles and challenges being constantly thrown their way. This spring, for example, experts expect British businesses to face an energy-cost cliff edge as the winter support package set out by the government is replaced.

Whilst purse strings are being drawn ever tighter to overcome these obstacles, there is no denying that the digitalization and innovation spurred on by the pandemic are still gaining momentum. In fact, according to Gartner, four out of five CEOs are increasing digital technology investments to counter current economic pressures. Investing in a digital future, driven by technologies such as the Cloud, Artificial Intelligence (AI), Blockchains and the Internet of Things (IoT), however, comes at a cost and to be able to do so – funds must be released through effective optimization of existing assets.

With that in mind, and with the deluge of cost and vendor data descending on businesses who adopt these technologies, never has it been more important for CIOs and CFOs to have a complete, detailed and transparent view of all IT costs. In doing so, business leaders can not only identify the right investment areas but increase the performance of existing systems and technology to tackle the impact of spiralling running costs.

Follow the below 10 steps to gain a comprehensive, detailed and transparent overview of all IT costs to boost business performance and enable your IT to reach the next level.

1: Develop an extensive IT service and product catalogue

The development of an IT service and product catalogue is the most effective way to kick-start your cost-optimization journey. This catalogue should act as a precise overview of all individual IT services and what they entail to directly link IT service costs to IT service performance and value. By offering a clear set of standards as to what services are available and comprised of, consumers can gain an understanding of the costs and values of the IT services they deploy.

2: Monitor IT costs closely

By mastering the value chain, a concept that aims to visualise the flow of IT costs from its most basic singular units through to realised business units and capabilities, businesses can keep track of where IT costs stem from. With the help of service catalogues, benchmarks, the use of a cost model focussing on digital value in IT Financial Management (ITFM) or what is often referred to as Technology Business Management (TBM) solutions, comprehensive access to this data can be guaranteed, creating a ‘cost-to-service flow’ that identifies and controls the availability of IT costs.

3: Determine IT budget management

Knowledge of IT cost allocation is a vital factor when making informed spending decisions and adjustments to existing budgets. There are, however, different approaches that can be taken to this including – centralized, decentralized and iterative. A centralized approach means that the budget is determined in advance and distributed to operating cost centres and projects in a top-down process, allowing for easy, tight budget allocation. A decentralized approach reverses this process – operating costs are precisely calculated before budgeting and projects are determined. Both approaches come with their own risks, for centralized overlooking projects that offer potential growth opportunities and for decentralized budget demands that might exceed available resources.

The iterative approach tries to unify both methods. Although the most lucrative approach, it also requires the most resources. So, the chosen approach is very much dependent on the available resources, and the enterprise’s structural organization.

4: Defining ‘run’ vs ‘grow’ costs

Before IT budget can be allocated, costs should be split into two distinct categories: running costs (i.e. operating costs) and costs for growing the business (i.e. products or services used to transform or grow the business). Once these categories have been defined, decisions should be made on how the budget should be split between them. A 70% run/30% grow split is fairly typical across most enterprises, but there is no one-size-fits-all approach, and this decision should be centred around the businesses’ overall strategies and end goals.

5: Ensuring investments result in a profit

By carrying out the aforementioned steps, complete transparency can be achieved over which products and services are offered, where IT costs stem from, and where budgets are allocated. From here, organizations can review how much of the IT budget is being used and where costs lead to profits and losses. By maintaining a positive profit margin, the controlling processes can be further optimized. If the profit margin is negative, appropriate, or timely, corrective measures can be initiated.

6: Staying on top of regulation

For a company that operates internationally (E.g. it markets IT products and services abroad), it is extremely important that it stays on top of country-specific compliance and adheres to varying international tax rules. To do so correctly it is necessary to provide correct transfer price documentation. This requires three factors:

Transparent analysis and calculation of IT services based on the value chain
Evaluation of the services used and the associated billing processes
Access to the management of service contracts between providers and consumers as the legal basis for IT services.

7: Stay competitive

Closely linked to the profit mentioned in step five is the question of how to price IT services in order to stay competitive whilst avoiding losses. This begins with benchmark data which can be researched or determined using existing ITFM solutions that can automatically extract them from different – interconnected – databases. From there, a unit cost calculation can be used to define exactly and effectively what individual IT services – and their preliminary products – cost. This allows organizations to easily compare internal unit cost calculations with the benchmarks and competitor prices, before making pricing decisions.

8: Identify and maintain key cost drivers

Another aspect of IT cost control that is streamlined via the comprehensive assessment of the cost-to-service flow is the identification and management of main IT cost drivers. A properly modelled value chain makes it clear which IT services or associated preliminary products and cost centres incur the greatest costs and why. This analysis allows for concise adjustment to expenditure and helps to avoid misunderstandings about cost drivers. Using this as a basis, strategies can be developed to reduce IT costs effectively and determine a better use of expensive resources.

9: Showback/Chargeback IT costs

By controlling IT costs using the value chain, efficient usage-based billing and invoicing of IT services and products can be achieved. If IT costs are visualized transparently, they can easily be assigned to IT customers, therefore increasing the clarity of the billing process, and providing opportunities to analyze the value of IT in more detail. When informing managers and users about their consumption there are two options: either through the ‘showback’ process – highlighting the costs generated and how they are incurred – or through the ‘chargeback’ process, in which costs incurred are sent directly to customers and subcontractors.

10: Analyse supply vs. demand

By following the processes above, transparency regarding IT cost control is further extended and discussions around the value of IT services are made possible across the organization. A more holistic analysis of IT service consumption allows conclusions to be drawn promptly to enable the optimization of supply and demand for IT services in various business areas. This, in turn, will enable a more comprehensive value analysis and optimization of IT service utilization.

Following these 10 cost management steps, a secure, transparent, and sustainable IT cost control environment can be developed, resulting in fully optimized budgets and in turn – significant cost savings. Cost-cutting aside, automating the financial management process in such an environment can boost productivity substantially freeing up time to focus on valuable work, thus leading to overall business growth.

The business and economic landscape is full of uncertainty right now, but business leaders can regain control via cost management, not only to weather current storms but to set themselves up for success beyond today’s turbulence.

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Business

How can law firms embrace automation and revolutionise their payments?

Published

19 hours ago

September 28, 2023

editorial

Attributed to: Ed Boal, Head of Legal at Shieldpay

Once again, AI is dominating international headlines. This time, it’s due to a closed-door meeting this month between tech leaders and US senators to discuss the technology’s regulation.

AI and automation isn’t just for the likes of Big Tech. We’re seeing predictive and automated technologies transform almost every sector and the legal industry is no exception. In fact, recent research from HBR Consulting found that 60% of law departments had implemented a legal data analytics tool last year and more than 1 in 4 indicated they were using AI for at least a single use case.

However, adoption isn’t without its challenges. Reticence remains among some and there’s also the danger of ‘transformation fatigue’ slowing real progress. If law firms want to reap the many benefits of automation – including revolutionising their payment processes – these challenges need to be carefully considered and thoughtfully addressed.

An area of great opportunity

Often seen as conservative, the legal industry has been gradually warming up to the idea of automation and technology.

While some pioneering firms have been quick to embrace automation tools, others remain cautious about disrupting their established workflows. As we navigate this landscape, it’s clear that certain areas of legal services are ripe for innovation.

One area is contract management. The process of drafting, reviewing, and managing contracts has traditionally been time-consuming and prone to human errors. Automation can alleviate these pain points by streamlining the entire lifecycle of contracts, from creation to renewal, thereby enhancing efficiency and reducing risks.

Another promising domain is legal research. Thanks to advancements in natural language processing and machine learning, legal professionals can now leverage AI-powered research tools that analyse vast volumes of legal data to provide accurate insights and case precedents swiftly.

But, while progress is undoubtedly being made, the legal sector still lags other sectors when it comes to innovation.

What’s getting in the way of progress?

This isn’t always down to a resistance to change. Often, it’s a result of firms spreading their resources too thinly across numerous technology initiatives.

Ed Boal

Attempting to tackle everything at once can result in ‘transformation fatigue’, where the benefits of individual innovations get diluted – leading to frustration and slower progress.

Before legal firms embark on digital transformation projects, a critical first step is introspection. Recognising and acknowledging areas where legacy processes and manual tasks still hold sway is paramount to optimising the impact of automation.

For many firms, archaic practices continue to consume valuable time and resources, diverting attention from higher value, billable tasks. One often-overlooked area is payments.

Legal firms play a critical role in complex transactions, from M&A and real estate deals to litigation and arbitration payments. The associated admin and processes represent a drain of firms’ time and resources. Spanning everything from collating stakeholder payment details and verifying payee identity to ensuring compliance with Know Your Customer (KYC) and Anti Money Laundering (AML) regulation, this adds unnecessary stress for lawyers – who would rather dedicate their time and expertise to their clients’ legal needs.

The repercussions of such time-consuming financial processes reverberate throughout the entire organisation. Administrative burden weighs heavily on the team, affecting productivity and ultimately, the bottom line: recent research from Shieldpay, surveying the UK’s Top 100 law firms, found that almost 1 in 3 (32%) say KYC collection and verification checks take 4-9 working days.

At the same time, firms are exposed to significant financial risk which can make handling client funds a costly endeavour. Not only are they penalised with fines if found to be in breach of stringent client account rules but firms are also subject to hefty premiums for Professional Indemnity (PI) insurance. No wonder 73% of all legal professionals and 90% of junior law professionals are concerned about the risks and time costs associated with holding client funds.

Revolutionising payment transactions

In short, manual payment processes are more than just an inconvenience for modern law firms. They can damage relationships with clients – who have come to expect a fast, painless and automated payout experience in a digital world – and impede revenue generation by tying up top talent in an endless cycle of paperwork and (unbillable) admin.

So how can firms take the pain out of legal payments?

Fortunately, new payment technologies have emerged as a formidable ally. Third-party payment providers offering solutions for law firms, such as escrow and paying agent services for specific transactional deals, or more embedded payment solutions such as managed accounts (TPMAs) – i.e. outsourced client account functions – offer secure and instant transactions, while prioritising transparency and automation.

TPMAs operate as an escrow payment service in which the third-party – a licensed external payments partner – receives and disburses funds on behalf of a firm and their client(s).

With advanced encryption ensuring data security, working with a regulated payment partner means legal professionals and their clients can engage in financial transactions with peace of mind – while law firms benefit from improved operational efficiency.

And the advantages don’t stop there. Enhanced transparency builds a sense of confidence and trust, while the elimination of manual data entry and repetitive tasks allows legal professionals to devote more time to legal services and fostering stronger relationships with their clients.

AI and automation has much to offer the legal sector. But its adoption must be carefully planned in order to avoid transformation fatigue that risks stalling progress altogether. With typically shallower pockets than Big Tech giants, it’s important for law firms to focus their efforts on specific areas that could benefit from automation, rather than rush to overhaul their entire way of working, all at once. This controlled phase-out is the key to avoiding adoption frustration, seeing a real impact on profits and productivity and setting firms up for real, lasting change.

Business

In-platform solutions are only a short-term enhancement, but bespoke AI is the future

Published

2 days ago

September 27, 2023

editorial

By Damien Bennett, Global Director, Principal Consultant, Incubeta

If you haven’t heard anyone talking about artificial intelligence (AI) yet, then where have you been? Conversations about AI and its advantages to society have been a key talking point over recent months, with advances being made in the generative AI race and ChatGPT opening a whole plethora of possibilities. Many have highlighted the advantages of AI, but notably it’s ability to create human-like content.

But these discussions have only scratched the surface of what AI is capable of doing. It is for far more than just essay writing, adding Eminem to your rave and photoshopping dogs into pictures.

In marketing, we have been using AI for years, for everything from analyzing customer behaviors to predicting market changes. It’s enabled us to segment customers, forecast sales and provide personalized recommendations, having a huge impact on how our industry works.

It is even, for the more savvy marketers of the world, becoming a key tool in maximizing budget efficiency – which is apt, considering over 70% of CMOs believe they lack sufficient budget to fully execute their 2023 strategy.

Now, as AI becomes more intelligent, the number of efficiencies it can unlock continues to rise. Not only can it help brands get the most out of their available resources and identify any areas of waste, but it can also help highlight new opportunities for growth and maximize the impact of your budget allocation.

The trick, however, is to veer away from the norm of using in-platform solutions with a one-size-fits-all approach and create your own, bespoke solutions that are tailored to your business needs.

Pitfalls of in-platform solutions

In-platform solutions aren’t by any means a bad thing. In fact, built-in AI tools have become increasingly popular, owing to their ease of integration, user-friendly interfaces and minimal set up requirements. They come pre-packaged with the platform, offering the user the ability to leverage AI technologies without the need for in-depth technical expertise or the upfront cost of building a solution from scratch.

However, the streamlined and accessible nature of in-platform AI solutions comes at the expense of complexity and customization. They are designed to serve a broad user base, but for the most part are built using narrow AI solutions with predefined features and workflows.

This makes them great for assisting with common AI tasks, but they lack the flexibility to tailor functionality towards unique business requirements or innovative use cases, limiting the potential efficiencies and cost savings that can be unlocked. Additionally, if a business’ competitors are using the same platform, they are probably using the same AI solution, meaning any strategic advantage gained from these will be reduced.

Bespoke AI solutions, on the other hand, may carry a higher initial investment – but can offer a significantly more attractive ROI over a short amount of time.

Why customized and adapted AI is the key

The difference between bespoke AI and in-platform solutions is similar to that between home cooked food and a microwave meal. Yes, it is more time consuming to prepare, and yes it likely carries more of an upfront cost, but the end result is going to be far more appealing and will carry more long-term value (financially… not nutritionally).

That’s because bespoke solutions, by nature, will have been tailored to address your brands specific needs and challenges. These custom-built tools allow for much greater efficiencies by streamlining workflows across different channels, automating more complex tasks, and providing deeper, more relevant insights.

The increased level of optimization can significantly improve productivity and reduce operational costs over time, offering a higher ROI. The increased flexibility of bespoke AI also allows brands to implement innovative use cases that can significantly differentiate them from their competitors.

The data analyzed can be specifically chosen to match business requirements, as can the outputs of the AI tool, providing a significant advantage when understanding and acting on the insights provided.

Additionally, these tools are, by nature, more scalable. They can be updated, upgraded and expanded as needs change, ensuring they continue delivering value as the business grows. They can also be designed to integrate with any existing IT infrastructure, from CRM systems and databases to marketing platforms and sales tools – leading to more efficient and effective decision-making.

Managing finances with AI

It’s no secret that AI in marketing automation has, and will continue to, revolutionize the way marketing is done. It has a bright, if slightly terrifying, future and can help CMOs to unlock new efficiencies, maximize the impact of their budgets and increase their ROI. And as this technology becomes more advanced, its impact will only increase.

But we already know that…and so does everyone else.

So, in order for businesses to make themselves stand out from the crowd , they must look to fully adopt the power of AI. Creating a customized and unique AI solution could be the way to set yourself apart from your competitors. A bespoke AI tool can provide brands and businesses with features unique to them and their business needs. As a result, companies will benefit from more useful data and better results to make more data-driven decisions for their business. Ultimately, this will help brands to maintain a competitive edge over their competitors, deliver ROI and most importantly optimize their budgets.