The shining promise of emerging technologies like the cloud and generative AI has organizations reaching deeper into their wallets: global IT spending is expected to increase by 2.4% this year, reaching $4.5 trillion, according to a January report by Gartner.
Yet businesses and their finance chiefs are also facing continued pricing pressures, making it critical for companies to ensure they are spending on tools they really need for the business — as well as eliminate redundant or outdated tools that could be beefing up costs. Many companies, however, lack line of sight into the solutions they are already using, which means the first step leaders need to take to optimize their IT spending “is to create that visibility,” said Christian Richter, chief customer officer for SaaS provider LeanIX.
“What are the applications that you have?” Richter said in an interview. “Who uses them? What are they used for? And what are the underlying technologies?”
Boosting IT, business communication
Many companies are spending on tools and technologies without first checking in to see if the business side even needs them, Richter said — shelling out funds to upgrade servers that don’t actually serve a clear or important purpose at the organization, for example.
Companies today waste approximately a fifth of their overall IT spend, a survey released by LeanIX in March found. Fifty-six percent of those surveyed pointed to outdated technology or technical debt as the biggest contributors here, according to the survey. Crucially, a lack of communication between the IT and business teams is also complicating companies’ IT spending landscape.
Only 30% of those surveyed said communication between those two teams was “adequate,” the LeanIX survey found, while 26% said the level of communication was “low or far too low.” For that matter, when it comes to IT optimization decisions in particular, nearly half of those surveyed (48%) ranked the communication as “poor.”
The real problem when cutting back on spending waste is not the technical optimization piece, but rather “having that conversation between the business side, the CFO, and the IT side,” Richter said.
Richter has served as CCO for the Boston, Massachusetts-based company for six years, according to his LinkedIn profile. Before joining the SaaS provider, he served as head of strategic products for T-Mobile shareholder Deutsche Telekom.
“The IT teams … they clean their own house, or clean up what they can do, but they missed the opportunity to take the knowledge from or the perspective from a CFO and from the business teams to do the cleanup,” he said.
Creating a common plan
Even amid economic uncertainty, IT and digital transformation remain at the top of the list when it comes to areas where companies are expecting to hike spending in upcoming months, CFO Dive recently reported. That means finance leaders not only need to be communicating with other key leaders like the CIO, but asking them to “bring data to the conversation,” Richter said.
“IT complexity comes at a cost. If you reduce it, you spend less for it,” he said. “So go to the CIO, and let them show you how [they] plan to reduce those costs.”
While companies will never get to a point where they have 100% mitigated tech obsolescence, Richter said, using data to focus on the critical areas of the business or those that could be hurt the most by outdated tech can enable them to boost efficiency and cut down on costs for their organizations. However, this can only be done if one has mapped out their companies’ existing technologies and everyone is aware of what the company has, he said.
“I think that should really not be underestimated, how important it is to democratize information about the IT landscape,” Richter said.
It’s important to set out a strategy both for the technology that the company is currently using as well as the software or other tools it might accumulate over the next two to three years, he said, and for the CFO and CIO to create a “common plan” to mitigate those costs.
“I think the CFO is a really good moderator and from a budget perspective, has their requirements but can also show a way out,” he said.