This is the last in our series of Precision Planning blogs examining the key questions that must be answered in order to effectively plan your organization’s IT for 2022.
“Doing something costs something. Doing nothing costs something. And, quite often, doing nothing costs a lot more!” – Ben Feldman
Why perform software audits: Profitable growth
IT spend—particularly for cloud and SaaS—continues to increase year over year. In fact, the rate of cost increases often outpaces the growth rate of the business. And if your costs for software, SaaS and cloud are growing at an annual rate of 10 percent but the company is growing at only three percent, that’s an unsustainable situation.
Full disclosure: many of the organizations that engage Flexera for our IT management solutions don’t want to spend less money. It may seem counterintuitive, but spending less is rarely the desired outcome.
What IT professionals really want
The goal instead is to flatten the spend curve and remove unpredictability. To seize the opportunity of technology value optimization in order to direct funds towards innovation and growth. To remove waste from IT spend while providing an exceptional digital experience for customers and employees.
When it comes to software, SaaS and cloud spend, there’s no shortage of waste. And every wasted or unoptimized dollar cuts into profitability and investment in growth.
But only 36 percent of the IT budget is allocated to growth and innovation (source: Flexera’s 2021 State of Tech Spend Report).
“IT is too expensive”
IT leaders are under constant pressure to do more with the same or—more likely—do more with less. Yet the C suite continues to ask why IT costs so much.
How do you show cost efficiency? In “How to Demonstrate IT Cost Management Success,” Gartner recommends clearly communicating your cost per unit improvements by splitting IT costs into supply and demand.
With this approach, IT leaders demonstrate IT cost efficiency with:
“Asset utilization: Demonstrate that IT is getting the most out of its assets, across software, infrastructure and cloud.
Resource utilization: Show that the CIO has resourced at the right level, and that the CIO is managing IT teams to maximize delivery against IT demand.
Strategic decision making: Demonstrate the financial impacts of major strategic decisions taken within IT.”
Recommended activities providing evidence of success include:
“Set up and maintain a process to regularly identify and eliminate waste
Evolve pricing management on cloud usage (for example, use of spot rates where appropriate)”
The ROI of IT cost optimization—and the cost of doing nothing
As your costs increase year over year, you’ll face greater pressure to prove IT cost efficiency. Assuming you’re spending $44 million annually for software, SaaS and cloud services combined, and your costs are increasing at a conservative three percent per year, the total five-year spend across software, SaaS and cloud is $234 million.
Now apply a very conservative annual savings of four percent—achieved through the technology value optimization delivered by Flexera One—and that five-year spend decreases to $207 million.
The cost of doing nothing is $27 million over five years if you let your IT costs continue to increase with no intervention.
The bottom line
Just imagine if:
You shaved a conservative five percent off your cloud spend with AWS
You shaved a conservative three percent off your spending with Salesforce
You shaved a conservative five percent off your expenses with ServiceNow
You shaved a conservative four percent off your next Microsoft renewal
You shaved a conservative six percent off your next IBM true-up
You shaved a conservative two percent off your unoptimized expenses with Oracle
It’s easy to see that those savings add up pretty quick. Now imagine all the advancements you could make with your cybersecurity, cloud migration, digital transformation and customer experience initiatives with those reallocated funds.
Technology Value Optimization
Reallocate spend. Reduce the risk of audits and security breaches. And chart the most effective path to the cloud. Get the most from every IT dollar.
It’s all possible with Flexera One—the only IT management solution that allows you to visualize your entire estate from on-premises to SaaS to the cloud. You’ll be able to mitigate risk, rightsize your IT estate, reduce costs and maximize every technology investment.
Now imagine if you do nothing
Do something today: click below to register for a free consultation with one of our business value advisors. You’ll see how better-informed decisions and a strategic plan give you and your organization the visibility and control to rewrite the rules and change the game.