If there was ever a lesson to be learned from the Covid-19 pandemic, it would be on the importance of investing in the right business tools and technologies. While some businesses had to scale up during the pandemic to cope with the demand for certain products, others had to scale back costs and reduce expenses to make up for lost revenue.
On cost reduction, Mike Kelly, CIO at Red Hat says: “The pandemic has moved the discussion away from cost reduction to cost optimisation. CIOs and CTOs don’t want to be accused of not spending enough. They want to make sure that what they are spending is being used as effectively as possible.”
According to Gartner, global IT spending will increase by 6.2% in 2021, with enterprise software representing the fastest growing sector at 8.8%.
A May 2020 report by Forrester suggests that there is significant pressure on CIOs to reduce IT infrastructure costs, even if it means getting creative with contract negotiations and product maintenance arrangements.
As more businesses moved to the cloud in 2020 in a bid to achieve greater agility and reduced costs, SaaS investments also increased at the expense of their on-premise counterparts.
With this in mind, the rest of this article will focus on ways that CIOs can keep up with the changing market dynamics while keeping IT infrastructure costs to a minimum.
Growth-based cost control
Forrester’s report recommends that companies cut costs based on 3 key indicators – survival, adaptation, or growth metrics. Unsurprisingly, struggling companies are advised to make deep cuts, while growing companies are encouraged to invest.
Adapting companies are advised to reduce their costs, albeit not as aggressively. Forrester recommends that CIOs reduce their IT budgets by 5% to 15% if projected revenues fall by 10%- 30%.
Rather than make cost reductions equally across the board, IT organisations are advised to prioritise cost reduction like they prioritise IT investments – with a focus on actions that promote the overall company’s goals while being prepared to modify budgets quickly as change happens.
To determine whether to invest or divest, cloud computing company Nutanix employs a portfolio management approach. This approach bases its decision-making on evaluations showing how the budget is likely to be affected by different market conditions, current business climate, and the state of technological advancements.
According to Nutanix CIO, Wendy Pfeiffer, the company is looking towards moving money away from parts of the budget that support on-site working, real estate, travel, etc, and towards infrastructure, services, and tools that encourage productivity in remote workers. This comes after the company has begun to enjoy newfound gains from the geographic distribution of its remote workers, with a recent extension in its IT support hours.
Manage IT staffing costs
The current IT talent scarcity meant that even while IT jobs were being lost during the pandemic, IT workers did not tend to face huge challenges in finding new roles.
Because of the current IT talent scarcity, IT leaders aren’t in a hurry to eliminate positions altogether, as the right mix of skills on hand might be required at any time.
This sets the stage for more calculated decisions regarding upskilling and hiring, especially in response to a market that now demands a broader talent base per individual (e.g full-stack engineers, and site reliability engineers, etc) to replace previously preferred specialist talent.
As automation takes over more tasks, more companies are moving further into the cloud, improving IT tooling. Concurrently, managed service providers, IT service specialists, and consulting firms are moving into the gap to supplement in-house resources, helping more organisations navigate the changing landscape even better.
Control cloud costs
It’s no secret that businesses are maximising their use of cloud resources for data storage, using cloud computing for analytics, machine learning, & AI; adopting SaaS, and migrating in-house applications to SaaS.
Paul Speciale, chief product officer at Scality, the multi-cloud data storage vendor suggests that budget should be at the forefront of budget discussions due to the data processing requirements of modern businesses.
Businesses are making the mistake of duplicating what exists on-premises into the cloud, rather than thinking about how the architecture should evolve. Jim Plourde, senior vice president of cloud services at Infor, points out the error of this thinking stating that the move of on-premises service to the cloud is effectively swapping gear between vendors. This change might lead to gains in flexibility and automation, but the ultimate gain lies in a multi-tenant SaaS solution where the “gear” is eliminated altogether.
The lack of a cloud strategy, however, is the ultimate mistake as this invariably leads to lower business impact and potentially higher costs.
According to Graeme Thompson, CIO at data management software provider Informatica, one of the most popular strategies for reducing cloud costs is a cloud-first, cloud-native approach that prioritises investments according to the impact provided. Rather than overprovision without a demand-based capacity schedule, organisations should move to automatic scheduling based on capacity reporting, to prevent paying a round-the-clock hourly rate.
Consolidating the number of vendors is another cost-saving action that Thompson recommends. Furthermore, consolidating software licenses into a single enterprise account is more cost-effective than having multiple departmental or group licenses.
Review your cost-cutting measures
Nutanix’s Pfeiffer believes that periodic reviews are essential to tracking the results of implemented changes.
Some of the review metrics she recommends include mean time to repair, product perception, and the propensity to get tasks right the first time. She goes on to state: “We believe that ensuring services to the satisfaction of our employees directly impacts employee productivity and happiness… we don’t base that on some philosophy; we base that on the data we collect.”
Several modern-day applications generate, collect, and store data, thus providing an analytics capability. While the analytics may be unique to the application or tool, And the data may be used to improve processes, operations, and to increase customer satisfaction.