This article was originally published by Forbes.
As the bar for digital transformation continually rises, CTOs, CIOs and CFOs face a serious cost conundrum. Embracing innovation is crucial for creating a competitive edge, but sustaining innovation amid economic belt-tightening is a mind-bending challenge. Enterprises are expected to operate at breakneck speeds using budgets that limit velocity. To go the distance, every dollar must be wisely spent—and that means regaining control of IT and cloud spending.
This, in a nutshell, is the key for sustaining enterprise innovation at speed and scale: finding funds from within. Scrutinizing every dollar to pinpoint waste and overspending is a great way to loosen purse strings to accelerate the corporate trajectory (and believe me, IT waste is rampant with the swift-moving costs that surround new investments).
Innovation is Wasteful, But it Doesn’t Have to Be
On average, companies overspend on IT by 20% with the majority of that waste coming from cloud, mobile and telecom services. Finding opportunities to reduce, reuse and recycle permits sustainable innovation and growth. Here are three prominent examples of unnecessary innovation spending and how IT expense management helps turbo-boost transformation.
GenAI & Cloud Waste
The cloud is where companies transform, and now generative AI is triggering more cloud spending, making it all too easy to get lost in the Wild West of cloud costs. Effectively managing applications and infrastructure, a practice known as FinOps, wrings every dollar out of the cloud estate, which can be poured back into GenAI initiatives.
A Communications Spending Explosion
A cornucopia of corporate communication tools is bleeding budgets in the form of tooling overlap, unused licenses and telecom service charges traced back to offices closed during the pandemic. Technology expense management software clears the haze of these costs to show exactly what’s required to meet business needs, creating a budget to fast-track transformation.
The most common example is the need to assign and reassign software licenses and mobile devices. Mobile devices are how business gets done, but apps and devices abandoned in the fog of employee turnover silently tack on costs. Technology expense management solutions scour the entire environment to immediately uncover unused assets and plug budget leaks to funnel money back into mobility and IoT innovation.
AI supercharges these results, allowing executives to firmly put the pedal to the metal. Research has found that AI-powered cloud cost management programs generate an average cost savings of 20% plus additional productivity gains compared to a do-it-yoursef approach, which averages less than a 10% savings.
The Beauty of AI for Automated Cost Reductions
Powering expense management strategies with AI applies machine learning, advanced analytics and robotic process automation to identify IT waste in real time and adjust services instantaneously. AI wrangles information across the IT environment, connecting the dots between a growing list of services, usage data, costs, contract details and newly released discounts.
This comprehensive sifting of siloed data quickly brings intelligence into one view, from unused infrastructure and mobile devices to billing inaccuracies and unsanctioned apps. From there, AI will prioritize actions based on the amount of savings.
Automated Cost Optimization
AI delivers a one-two punch to accelerate cost savings with actionable recommendations and automated problem-solving. For example, the AI engine might recommend how to more efficiently use cloud storage and servers and will then do the work of actually solving this problem with just the click of an approval button. This accelerates speed-to-savings that can be reinvested into digital innovation.
Automation Unites IT & Finance
IT and finance traditionally work in silos, yet each group has overlapping dependencies and coinciding fiscal management tasks that require tight collaboration. AI can establish a hyper-automated ecosystem where stakeholders reduce unnecessary spending more efficiently—with clear observability, integrated systems and automated IT cost governance and reporting.
Cost Optimization: Jumping the AI Hurdles
Building an AI-powered platform for cost optimization isn’t always easy. Visibility challenges temper cost savings with incomplete and outdated information. Highly interconnected platforms are the only way to ingest vast data sets across a growing portfolio of IT services, making integration essential. Even when AI can automate actions needed to capitalize on cost-saving opportunities, oversight is still necessary.
For these reasons, CFOs and CIOs are carefully considering warnings issued by analysts about DIY approaches:
Labor and Resources: The level of interconnectivity required for AI-managed IT spending requires a large team of dedicated experts. Forrester, for example, estimates needing 15-45 engineers and at least $1M to invest in building a cloud cost management technology platform from the ground up—plus three full-time employees to operate a FinOps program.
Rate of Return: Considering the level of complexity involved in DIY tech expense management, it’s not surprising to hear that 75% of companies believe they will have to wait at least two to three years to see real results from their in-house platforms.
Maturity Level: Research shows most companies are in the early stages of advanced technology expense management. For example, McKinsey reports that less than half of companies are adept at analytics despite citing the need for better budgeting and forecasting.
The good news is you don’t need to transform overnight. There are strong leaders in technology expense management who can help you start immediately taking the reins.
Deriving long-term business value from existing technologies while simultaneously accelerating new investments requires a disciplined approach to handle the natural side effect of IT overspending. AI offers an effective tool to govern spending for sustainable IT transformation, and the key is to strike the right balance between in-house resources and providers with advanced AI platforms. Consider your observability, analytics and integration challenges but keep dedicated expertise and professional services at the top of your needs list. While AI is the new necessary component to make every dollar go the distance, the human touch is still the compass guiding enterprises to fuel innovation faster.
Ready to fuel faster innovation? Talk to Tangoe.