TALKING
‘‘ business
As the economy continues to come to grips with the impact of inflation , Australian businesses have landed in a cost reduction era .
Why ? After two years of almost zero investment growth throughout the peak of the COVID-19 pandemic , companies splurged on tech . In many cases , IT budgets increase significantly as temporary measures – namely online meeting apps – were quickly replaced by full blown and expensive Digital Transformations .
Technology spend , and especially cloud consumption , went unchecked . Analyst firm Gartner reported a 31.8 % year-on-year growth in public cloud services – Australian companies indulged , with spend hitting AU $ 18.7 billion in 2022 .
This happened because there was no blueprint for bringing work from home ( WFH ) policies to life in a matter of months for a company ’ s entire workforce . As a result , many organizations over-subscribed to apps , and footing the bill became status quo as businesses had to quickly adapt to a fully remote workforce .
Buchanan rightfully argues : “ In response to the current economic turmoil , organizations are using digital technology to realize operational efficiency and cost savings and to transform their company ’ s value proposition , revenue and client interactions . This means a steady IT budget is necessary to push these digital business initiatives forward .”
The $ 1 million question – or in the case of a large enterprise , the $ 100 million question – is : how can I reduce technology spend quickly without hurting business ?
To answer this question with urgency , companies need to be thinking both cost reduction and cost avoidance .
Discretionary cloud spend and end-user compute are two key causes for financial waste . Some of the lowest hanging fruit that can be cut from the branch and result in immediate cost reduction include excess mobile services and end-user device leases ( and associated software ), multiple collaboration apps and general cloud compute and storage .
Pete Wilson , General Manager , Apptio Asia-Pacific
As we moved into 2022 , technology needs plateaued . After six months , boards and management teams were hit by a wake-up call ; they realized they needed to get their ( over- ) investment under control . This is now accelerating amid a swathe of macroeconomic challenges .
For many , the knee-jerk reaction has been to stop all spend . ‘ Do more with less ’ has arguably never been so profound .
However , Gartner VP analyst Stewart Buchanan , said : “ It is paramount that CIOs continue to have access to funding . Without money for transformation , costs cannot be restructured . Many organizations mistake inaction for a cost saving but instead accumulate technology debt .”
Another culprit is poor asset allocation and use of fixed spend . For example , a dozen on-premises data center servers used to 20 % of their capacity can be consolidated , freeing a large portion of excess compute to be used for future projects , effectively avoiding additional technology spend as the company expands .
Organizations miss the opportunity to bring these costs under control because they become micro-focused on challenges at hand , rather than taking a long-term view to benefit broader long-term business priorities .
The trifecta for value realization
With so much pressure to reduce cost , cutting discretionary spend and optimizing fixed
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