9 July 2020

Three strategies for controlling enterprise IT spend

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The current economic environment and outlook is uncertain and pressurised, which means that all organisations are facing the challenge of how to realise potential IT cost savings, while balancing the need to digitally enable the business.

The impact of Covid-19 is continuing to be felt by businesses across all industries, and it's been a particularly tough year for IT. The pandemic has slowed licensing of software products, and according to ResellerNews's Covid-19 Impact on Application Software report, the continued fallout from the outbreak will undermine companies’ and industries’ propensity to buy, as well as delaying product launches. This is a far cry from what ResellerNews was saying in October of 2019 - that IT product and services spending in New Zealand was expected to grow by more than 3.6% in 2020. 

Did you know that on average, organisations spend from 60% to 85% of their IT budgets supporting complicated legacy applications that do not support the growth of the organisation?

Even before Covid-19, digital transformation was disrupting business models on a global scale. Business owners and IT managers could see that they needed to digitise and automate wherever possible, to remain competitive and relevant. Covid-19 expedited this digital shift, and the need to facilitate remote working and automating of workflows and processes is still very much alive if not accelerated..

So how do you control enterprise IT spend while still enabling the digital acceleration? 

The broad strategy is to take a different approach. Cutting projects, or putting them on hold, risks disrupting the business strategy and plan which can have a negative impact on competitive advantage and customer experiences. In turn this will impact future investment plans in transformative IT.

Jim McGittigan, a Research VP with Gartner, said in 2018 that CIOs need to build an effective partnership with CFOs in order to mitigate the risk of projects being the victim of cost-cutting. "Generally speaking, CIOs haven’t demonstrated effective IT cost management to their CFOs’ satisfaction,” says McGittigan. “A lack of understanding of the contribution of IT to strategic business goals often leads to cost-cutting and not true cost optimisation."

This belief must be flipped on is head to successfully fund innovation and digital business initiatives, and the way to achieve this is run IT like a business and embrace different approaches to solve challenges and demonstrate business value.

1: Transform operations with DevOps and to create faster transformation
What's DevOps? It's a set of practices that combines software development (Dev) and IT operations (Ops). The idea is to develop solutions swiftly while seeking continuous improvements via:

  • Increased frequency of delivery, deployment and release
  • Continuous performance monitoring and testing to accelerate resolution time
  • Better collaboration, shared responsibility and efficient feedback loops.

The DevOps approach brings together Development, Operations and QA teams so that everyone is on the same page and working towards the same goals.

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Rapid application development (RAD) means adopting an agile approach that focusses on early delivery of software, iterative development and collaboration between business and IT groups. Using low-code application development technologies is the key to quicker, more efficient and successful software deployment. At Optimation, our RAD approach utilises Outsystems' low-code approach to agile software development. This approach prioritises swift software solutions, something we take a detailed look at in our new eBook, Need for Speed.

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To optimise spending and reduce risk, businesses need to adopt flexible software development methodologies and shift traditional mind-sets.  Rapid application development systems allow for faster prototyping of new business solutions, allowing business leaders to test and iterate progress much faster. This shift in the IT mind-set will be rewarded with savings in the long term.

2: Modernise your IT stack and applications
This strategy focuses on enhancing and extending legacy systems. Organisations across all industries need to look at how they can capitalise on the use of modern technologies - not just for gaining efficiencies and reducing costs, but for implementing new applications, processes and products to deliver on business objectives.

Your legacy systems don't have to complicate digital transformation, but replacing them isn't always a feasible option. What if you could leave them in place as a foundation and layer the next-generation platform on top of them? The strategy is to use modern tools to manage and monitor both the legacy software and the new components. This approach means organisations can build a hybrid system that allows them to use cutting-edge tools while retaining the functional parts of their legacy system. In this way, they're reaping the benefits of digitisation while retaining their legacy systems and reducing costs.

3: Outsource IT services
Outsourcing IT to external vendors or suppliers can increase the operational efficiencies of existing processes and free up in-house resources to focus on digital transformation that produces real business value.

Outsourcing IT support means that a company can:

  • Cut costs in the areas of training, recruitment, and the expense and complexities of employing teams that cover support.
  • Mitigate risks – this is achieved with a quality provider who will have the correct disciplines and methods applied to your application support. Knowledge is transferred across a wider group and not retained by a single person or small group of people. Application documentation, security, scale and recoverability are always considered and managed.
  • Get firm control over IT costs - contrary to popular opinion, outsourcing your IT support is a sure way to save money. It’s an opportunity to convert your fixed costs to a variable cost structure, freeing up capital for more productive use.
  • Gain additional expertise and capabilities - when you find an IT support provider with the skills, technologies and expertise to fulfil your specific requirements, they will have developed the most efficient techniques for what they do. It's what they do, and they are focussed on providing the best, most efficient support possible with the depth and breadth to scale and support your business

Outsourcing is a popular way for many businesses to manage their costs. It’s one of the best ways to utilise their resources to the fullest, while ensuring they're keeping ahead of the competition.

Ask yourself the following question: “How can I free up my IT resources to focus on high-value digital transformation, while still keeping the business systems running”

The answer is likely to be one or more of the items above: Use a mixture of devops and rapid application development to speed up delivery; modernise and streamline the management of your existing application stack; and / or outsource legacy application support.

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The Covid-19 era has presented businesses with many challenges, and will continue to do so, since the pandemic looks to be around for some time. Now is not the time to cut back on innovation and digitisation, because now more than ever, organisations need to find ways to harness technologies to gain efficiencies and drive productivity. But because these are uncertain times, it’s equally important to find ways of achieving and maintaining digital transformation that are cost-effective.

At Optimation, our innovative thinking leads to expert delivery solution at scale. Talk to our team to find out how to achieve control of your IT spend while continuing to innovate.