IT Financial Management: Building Your Plan for Cost Optimization 

Plan for Cost Optimization_Main blog page

As business leaders design a program or practice to financially manage their IT costs, there are important steps to consider across the key phases of preparation and execution. Our previous article explains the four critical prerequisites for IT financial management, including audits and cost assessments that expose IT expenditures and help companies catalog a library of their IT services, assets, as well as their associated costs. 

This article focuses on what should happen next – how to arrive at cost optimization recommendations and how to avoid challenges along the way. 

How to Optimize Your Technology Costs 

Now that you have a sense of the prerequisites, you can begin to estimate what it takes to perform the more meaningful work — finding ways to save money.  

Evaluating Data to Find Savings and Unused Resources 

Know how you are currently purchasing services and using those IT resources to evaluate and identify underutilized resources and overprovisioned hardware, software, and virtual assets. Most importantly, you want to understand which actions would save the most money or avoid more future purchases.  

Here are Tangoe’s top tips. 

  1. Leverage AI to generate savings recommendations automatically. IT expense management software platforms and solutions are good at this, delivering results in a matter of hours and days — rather than weeks and months with manual analysis. 
  1. Evaluate how efficiently (or inefficiently) you’re using resources you already pay for – common sources of IT waste include: 
  • Overprovisioned cloud infrastructure or ad-hoc deployments lacking financial or IT oversight 
  • Redundant applications due to Shadow IT challenges — communications applications are of particular concern 
  • Employees assigned smartphones when they use their computer-based softphones to communicate   
  1. Normalize data across multiple vendors to arrive at per-unit costs for each service — this helps to easily cross-compare prices using an apples-to-apples approach.  
  1. Establish a baseline of your current costs and compare them to market-leading prices from preferred vendors – identify your savings potential if you switch to a different vendor. 
  1. Create custom cuts of information so that each department or line-of-business leader can see how their decisions and purchases impact costs and budget overruns – this can open additional ways to trim unnecessary spending. 

How many people and how long will it take you to evaluate your data, identify cost-saving opportunities, and act on insights? Once you have identified areas of waste and you have prioritized your action plan, don’t be afraid to ask for a helping hand. 

Analysts Estimate You’ll Need 3+ FTEs or a Service like Tangoe’s 

Acting on cost-saving recommendations can be daunting and prevent companies from putting dollars back in their budget. Forrester estimates that three full-time employees are needed to operate a cost management program. Other studies show that the number can be four employees or higher.  

IT Financial Management: Time-to-Savings is a Problem 

Time-to-savings is a problem particularly for cloud cost optimization programs with one study showing 75% of companies reporting a wait of at least 2-3 years to see real results from their home-built FinOps platforms. Only 24% reported they would see material results in 12 months or less.  

This is where a pre-built cloud cost optimization platform really pays off, delivering cost-saving insights in 24-48 hours — thanks to powerful AI tools. Time-to-savings is faster too with AI helping clients automatically make changes to their services in response to recommendations. Learn more about how AI is hyper-automating IT financial management.  

Managed Services also Help 

Keep in mind, dedicated program managers and oversight are typically included in the price of an IT financial management service. Partners like Tangoe have professional services available to:   

  • Consolidate duplicate SaaS tools and reallocating unused SaaS licenses  
  • Downgrade IaaS instances or taking advantage of discounting opportunities — in some cases IT expense management software can do this for you automatically! 
  • Decommission unused telecom circuits 
  • Repossess mobile phones, wiping them clean, and reassigning them to new users 

For instance, Tangoe provided 335 hours (about 2 weeks) of best practices oversight annually for one client managing their mobile and telecom costs through our services. Another Tangoe client spent 40 hours each month compiling cloud cost reports and allocating costs. Today Tangoe does it in just minutes – read the full story. 

Beware of Labor Restrictions, Slow Returns, Lack of Maturity 

Manual processes, financial management inefficiencies, and a lack of expertise and human resources can negatively impact IT financial management and cost optimization including both the time-to-savings and the amount of savings. And the opportunity cost reaches beyond dollars and cents with unpaid bills threatening connectivity disruptions and business continuity.  

Think carefully about the prerequisites and consider which activities you’ll want to keep in house versus which administrative processes should be outsourced to an IT financial management service provider like Tangoe. Your decisions can be the difference between cost optimization gone wrong or done right.