In 2024, adverse innovation economics will become a high-stakes profitability game, requiring companies to adopt strict technology cost controls in order to compete in today’s digital economy.
Next year will be the year when cloud hangovers turn into cloud bankruptcies if companies don’t get a handle on rising expenditures. Consider that Gartner reports it’s common to overspend on cloud services by as much as 70%, Generative AI spurs more cloud spending, and analysts expect cloud infrastructure to grow the most, at a rate of 26.6% next year. Cloud will soon dominate IT budgets, consuming more than 50% of spending.
Technology cost governance will become an increasingly urgent concern amid cloud inflation (cloud-flation) and the unwavering demand for digital innovation despite flat IT budgets and economic uncertainties. Over the next months, executives must be attentive to the fiduciary responsibilities of IT, ensuring companies are investing wisely in AI, cloud, mobile, and telecom. That means efficiently using all resources and eliminating any overspending to make innovation profitable and financially sustainable.
And the stakes are high.
Those failing to control tech spending (particularly startups and mid-size businesses) could see out-of-control costs quickly drain their budgets or simply be outperformed by competitors who succeed in turning their own IT waste into fuel for more digital transformation. The next year should be dedicated to governance in innovation with stricter boundaries on expenses.
More Predictions in Technology Cost Management
As Innovation Expands and Fractures, Tech Costs Will Become Harder to Control
Accessible online technologies, scalable cloud capabilities, and variable pricing are already making it difficult to control costs. As innovation continues to be unleashed, technology will become more fractured, making it even harder to rein in spending. Whether it’s Generative AI creating more Shadow IT applications, SD-WAN and SASE introducing more internet service providers, or more IoT devices assigned to every employee, technologies will be widely distributed.
With expansion comes more to manage. Sprawling assets, owners, vendors, and pricing options multiply the work needed to keep a lid on IT budgets. Companies will need visibility, centralized management, and AI to track it all – not to mention cross-collaboration supporting resource rationalization and financial predictability.
Technology Cost Governance will Rise in the IT Priority List, Competing with Cybersecurity and Performance
CIOs are under pressure to make room for new investments in Generative AI, and with few companies stockpiling unallocated funds, many will need to find GenAI funding from within. As a means to create budget, cost optimization will be a prerequisite in 2024, pushing it to a top priority on par with security and systems performance.
Tech ROI will become an executive agenda as leaders dig into the dollars and cents to define payouts and the business value of their investments. “Organizations are shifting the emphasis of IT projects towards cost control, efficiencies, and automation, while curtailing IT initiatives that will take longer to deliver returns,” said John-David Lovelock, Distinguished VP Analyst at Gartner.
Achieving tech ROI will mean assuring returns cover expenses without increasingly eating more of the IT budget and reaffirming innovation expenses won’t outpace business growth. Executives will need to connect spending to business strategy, managing risks in returns, waste, and overspending but also scrutinizing cost allocations tracing where money goes and which areas of the business benefit.
Chief Cost Management Officers Will Become a Thing as Departments Unite
Companies may soon designate an executive or department to elevate technology financial management priorities. And, where no CCMO exists, CFOs and CIOs will become best friends, as will their departments. Additionally, there may be more CIOs reporting directly to CFOs.
In 2024, CIOs and CFOs will need mindshare, which may be challenging. CFOs must learn to take a technical view, appreciating how GenAI and cloud infrastructure work. Meanwhile, CIOs, DevOps teams, and IT engineers must learn to be fierce financial guardians. Traditional provisioning prerogatives must be replaced with purposeful workload placements mindful of vendors, locations, timing, and cost-effective alternatives to on-demand services.
IT and finance departments will also unite. While these organizations have traditionally operated independently, they will be increasingly conjoined in their decision making. Cost control will trigger the necessary bridge balancing digital initiatives with budget performance. The same way SD-WAN and SASE platforms are uniting network and security, technology expense management platforms will converge IT and finance.
AI Will Bring Autonomous Cost Savings to the Horizon
AI has long been crunching numbers to save thousands, and now autonomous cost savings will come into view. Expense management is becoming so automated that financial analysts can now act on cost-saving recommendations with the click of a button. Virtual assistants are doing more than simply flagging cloud waste and recommending solutions. They are adjusting service settings, so companies can capitalize on savings opportunities immediately.
These new capabilities are a key milestone on the journey to autonomous cost savings, which will rise on the horizon. With maturity, virtual assistants can be trusted to act on their own playbooks. That’s when lowering IT costs will happen without overt human supervision.
The Urgent Need for Cloud Cost Control Will Drive Mainstream Adoption of FinOps Models and Managed Services
Cloud is the number-one threat to IT budgets. Roughly 66% of companies are already spending more on cloud than they budgeted, and with Gartner reporting the cloud will take 50% of IT spending by 2025, cost overruns will be painful en masse.
Gaining membership momentum, one painkiller will become the predominate solution: FinOps.
This cloud optimization strategy is growing because it offers a structured model for decreasing costs and increasing the efficiency of service consumption. But achieving all that FinOps promises can be difficult without help. Forrester warns against taking a do-it-yourself approach due to fiscal and human requirements. Meanwhile, other research shows managed services can double the amount of savings when compared to in-house FinOps programs.
A Final Note
Runaway cloud costs are telling a story of the real-life impacts of innovation waste and how dynamically scalable services coupled with rising prices negatively affect the ability to build self-sustaining digital success. Today’s realities present daunting future challenges for businesses unprepared to control tech spending. Fiduciary responsibilities will be imperative, as unlocking sustainable innovation will command a good stewardship of your greatest asset — technology.
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