In 2024, technology cost governance will become an increasingly urgent concern amid cloud-flation and the unwavering demand for digital innovation despite slow-moving IT budgets. Over the next 12 months, executives must be attentive to IT’s fiduciary responsibilities, ensuring companies are gaining adequate business value that covers the cost of new investments in AI, cloud, mobile, and telecom technologies. That means efficiently monitoring financial returns, but also using all purchased resources and eliminating any overspending to make innovation financially sustainable for the future.
And the situation has never been more urgent.
As such, technology expense management will rise in the IT priority list, competing with initiatives like cybersecurity and systems performance. But what is technology expense management? It’s both a practice as well as a solution offering that gives CIOs, CFOs, and procurement leaders a modern and more effective way to manage their portfolio of technology assets, expenses, and services.
As the leading provider in this industry, every year Tangoe’s consultants engage in digital transformation and cost-reduction projects, evaluating billions of dollars in IT spending across hundreds of providers in 200 countries. Here are our top tips from the past 12 months.
The cloud remains the number-one source of savings for companies and should be the first point of focus for any cost-optimization effort. Studies report 30% of cloud assets go to waste. According to our own data, Tangoe clients saved up to 40% in 2023 with cloud expense management solutions, and there’s room to go higher. Rising volumes in cloud spend means small reductions in cost will generate significant payouts in 2024 with immediate results recognized through rightsizing on-demand resources. Plus, recent changes in market dynamics are creating more savings opportunities for cloud consumers. Here’s what you need to know.
Amazon Web Services (AWS) has been the market leader since public cloud infrastructure as a service (IaaS) first hit the market. But now its market domination is being challenged by other well-recognized providers including Microsoft Azure, Google Cloud Platform, and Oracle Cloud. In April 2023, AWS reported its slowest revenue growth in at least a decade, signaling a shift in the market. Gartner reported Google Cloud saw the highest growth rate of the top five IaaS vendors, growing 41% which outpaced AWS at 36% growth. Competition is heating up with compelling offerings at competitive prices, making AWS no longer the default choice.
When diversification or switching providers are out
of reach, optimizing the IaaS service you have is still considered low-hanging fruit for conserving costs and making full use of the resources you already pay for. For example, AI-powered IaaS optimization engines, like Tangoe’s, make it easy to gain visibility into multi- cloud environments, taking control of underutilized infrastructure and leveraging discounts and other features (Reserved Instances, Savings Plans, and service pausing) to reduce expenses.
Infrastructure services are typically under the ownership of the IT team, simplifying optimization. That’s very different from SaaS and Shadow IT challenges with distributed owners that make it more difficult to rein in spending. With IaaS, Tangoe clients get visibility and cost-saving recommendations within 24-48 hours, and many IaaS configurations can be automatically adjusted for faster time-to-savings.
Clients cut costs by 40%
with Tangoe Solutions
of cloud assets go
to waste
Can you cross-compare 480,000 options to pinpoint the best pricing model for your cloud infrastructure service? Today, there are hundreds of thousands of SKUs for a single hour or partial hour of AWS EC2 services and over 1 million ways to purchase one server from AWS. Options from Google Cloud Platform and Microsoft Azure only thicken the haze. Pricing and discounting can be overwhelming due to a lack of standardization across providers and the millions of possibilities to cross compare.
And the options keep on coming – from AWS as well as other providers.
With the complexity of IaaS offerings in place now, spreadsheets and manual processes are no longer the right tools to lead IT purchasing decisions, knowing when to exchange discounts for long-term commitments. As cloud service providers continue to roll out more services and pricing models in 2024, AI is the only way to cut through the overwhelming number of choices. Diversity and model optionality are positive news for consumers. However, this complexity now requires advanced analytics and pricing models to simulate scenarios and make sense of the mountain of possibilities.
Tangoe’s AI engine instantly compares more than 1 million AWS pricing schemas showing you which on-demand service SKU will save you the most money. Plus, it’s a multi-cloud solution, so advanced analytics work across other providers too like Azure and Google Cloud Platform. Learn how to use AI to hyper-automate cloud cost optimization.
AI-powered cloud optimization programs are 53% more likely to report cost savings of greater than 20%. Meanwhile, those NOT using AI save less than 10%. Read the full research report.
Cost savings NOT
using AI
Tangoe clients are buying more direct cloud connectivity (also known as direct cloud interconnections or cloud secure gateway connections). These services use a private dedicated network to connect to the cloud. Tangoe data shows a vast difference in the price paid when comparing RFP-procured services versus those who simply accepted their carrier’s service offer.
For instance, clients who engaged Tangoe’s professional negotiation artists to land the best deal found the price difference to be as high as 6X, 8X, and 10X particularly as they moved into services with high bandwidth (1,000 to 10,000 Mbps) for more reliability. One manufacturing client saved over 70% on the cost of their cloud connections. This is a key source of savings in 2024.
Mobile devices are how business gets done in today’s remote-work and post-pandemic world. Smartphones, laptops, and IoT devices are consuming more of the IT budget and more of the IT team’s time — one study shows as much as 34% of their time. For these reasons, mobility remains a key source of wasted time but also overspending. Tangoe’s data shows companies can save 30% on their mobility costs and research from Vanson Bourne says companies stand to gain 52% in productivity with the right approach to mobile device management. In handling 14 million devices for our clients, Tangoe has its finger on the pulse of this market. Here’s where we see the biggest opportunities for clients.
Gain in productivity with the
right approach to mobile
device management
Cybersecurity threats and policy evaluations are giving rise to this trend.
Over the past two years, IT and security leaders have put more scrutiny on mobile security and mobility ownership policies, and in doing so they’re uncovering a wealth of unnecessary devices. Today’s sophisticated unified communications tools are also a factor as decision-makers more guardedly rationalize the business need for both mobile and VoIP softphone licenses. Tighter controls are being put around hardware assignments.
One client saved 60%: In lieu of providing one phone for every employee (100% coverage), one client shrank their coverage to 40%, generating a 60% savings! Aside from the obvious avoidance in hardware and service costs, their mobile “repos” also reduced management tasks thereby increasing IT productivity.
Ready to jump on this opportunity? Don’t forget, repossessions make buyback programs and market-leading cashback rates critically important as companies recapture the cash value of their mobile devices to further fund mobility and IoT innovation. See why Tangoe’s buyback program leads the industry.
Shifting corporate-ownership policies should also be noted as a trend carrying over from last year. Tangoe continues to see clients revert to a corporate-owned policy after being disappointed in the negligible amount of cost savings generated by a bring-your-own-device (BYOD) approach. Many who explore BYOD policies regret their decision. Find out if it’s time to move on from your BYOD strategy.
Reductions must be made in ways that don’t jeopardize productivity. Tangoe has both mobile management software and consultative services to help you avoid mistakes and make the most of your mobility budget.
Connectivity and management challenges have previously stood in the way of device-based innovations known as the Internet of Things (IoT). But new evolutions are now clearing those hurdles, sparking a renewed interest in all things mobility including IoT investments backed by 5G fixed wireless networks.
5G lowers fixed-line connectivity costs. 5G offers improved speed and lower latency which means new opportunities to replace MPLS and other fixed-line network services with more affordable 5G services. These savings are highly applicable to mobile and IoT programs.
And, there’s another essential way to save.
Tangoe’s own growth rate is evidence of more mobility and IoT investment, with roughly 18% of our 2023 business growth coming from this area.
Additionally, the contract may restrict your ability to switch between plans, making optimization impossible until terms are met.
These “dirty details” make it even more important to get unlimited plans right. Choose carefully among tiered unlimited plans and be fully informed so you can make the most educated decision.
Satellite internet service came in with hurricane force this year. Every year, Tangoe monitors which telecom vendors dominate our clients’ financial outlay. In 2023, Starlink (owned by SpaceX) made the largest leap we’ve ever seen in a 12-month period — jumping up from the 81st largest vendor to the 48th largest vendor.
Nearly doubling its Tangoe client marketshare, Starlink’s jump should be viewed as a call to action and foreshadowing of what’s to come. There is a fast-growing demand for satellite services. As this market matures, satellite internet service providers (ISPs) should be closely evaluated for their viability to deliver high-speed, globally reliable connectivity in support of video, voice, and other latency-sensitive communications particularly in remote areas where options are limited.
Satellite ISPs have the distinct advantage of delivering services almost anywhere on Earth, which is particularly beneficial for those in rural regions seeking an alternative to low-speed DSL. In these use cases, Tangoe sees our clients adding Starlink to improve network performance and reliability.
Cheaper satellite hardware and falling launch costs are already opening the satellite market to more competition, and with lower prices it will become a compelling option. To date, Starlink has more than 4,500 active satellites in orbit and offers commercial and residential service to most of the Americas, Europe and Australia. In late 2023, Amazon announced it will compete with Starlink, building equally massive satellite constellations to also blanket the globe.
As companies move away from MPLS services, fixed-line connections get overlooked as an opportunity for contract negotiations. This small flaw can be a big missed opportunity for IT savings, because MPLS prices are declining.
Most companies still have at least some MPLS services in place and should compare their network modernization plans and migration schedules with their MPLS contract renewal dates to ensure savings are not lost simply because IT fails to focus on a set of services that represent a declining percentage of the overall network. After all, MPLS is among the most expensive of all connectivity service types. When working with clients, Tangoe finds that their phased approaches to modernization are happening at a rate slow enough to easily justify capitalizing on these opportunities.
Telecom modernization initiatives offer significant upside potential, but internal company resources are a key limiting factor.
Switching from MPLS to internet connectivity is a big money-saving trend, and Tangoe found that in 2023, clients saved 20-30% on like-sized network services or doubled their bandwidth for the same cost. It should also be noted that true payouts, however, were rare – most clients opted to reinvest at least some of their savings by purchasing more network services.
While this strategy is a hot trend, there’s a catch.
Simply put, the talent crunch is killing innovation, and Tangoe saw more evidence of this in 2023 with the low level of unemployment negatively impacting IT, procurement, and telecom groups across our customer base. Macro-trends are also a factor – there is a lack of willingness to expand internal staff in today’s uncertain economic landscape.
Why is talent so critical? Thanks to software-defined wide area networks (SD-WAN) and new secure access service edge (SASE) offerings, it’s far easier today to securely tap into a wide variety of network access methodologies to cut costs, trading MPLS for more affordable internet connectivity. But nonetheless, making those changes happen is still a lot of work:
While the desire to modernize is strong, logistics are slowing progress and ultimately inhibiting telecom transformation.
Learn about how Tangoe can give you the IT staff and technical support to champion your telecom transformation from start to finish.
2024 is the year of technology expense management, and while there is wide savings potential in optimizing cloud technologies, targeted efforts in mobile and telecom optimization also offer significant opportunities in cost reduction. Technologies are evolving at accelerating rates and new providers with disruptive services are changing key market leaders annually.
Tangoe helps financial, technology, and procurement leaders stay on top of IT spending trends, market dynamics, and savings strategies helping them get more value out of their technologies and budget funds. In leveraging Tangoe’s unique insight and market intelligence companies have a money-saving playbook to stretch dollars further and make smart investments in the year ahead.
