Last year brought more than its share of disruption, and there’s no sign of any let-up as 2023 gains momentum. Here are ways CIOs should prepare to face any eventuality, and come out the other side even stronger.
The effects of such an unpredictable environment are profound, and no organization in any industry is immune. Looking across our client base, we expect to see varying degrees of impact as the turbulence continues. The common thread? In almost every case, there’s an increased need for data insight and technology-enabled agility to reaffirm technology’s position at the center of investment strategy in order to achieve organizational growth.
So when it comes to securing funding and resources from the board, is the CIO put in the box seat if technology is at the center of investment strategy? Not necessarily. While investing in technology is key ”and becoming more so” this doesn’t mean that CIO budgets won’t come under pressure, both for capital spend as well as for operations and maintenance (O&M). That’s why forward-thinking CIOs are taking action today to strengthen their position. And no matter the industry, we believe there are four smart moves that any CIO can make now to help them weather any economic storm.
1. Optimize cloud spend
It’s a good time for CIOs to conduct a financial health check on their technology budget. This includes running a benchmarking spend analysis on all categories relative to industry peers, as well as leading technology companies. Then, identify opportunities to reduce run costs and free up funds to invest in transformation and new technology capabilities. Specifically, look at your organization’s newer areas of technology spend, especially since the last economic downturn. What’s the biggest change you’ll find? Almost invariably, spending on cloud has leapt from low or even non-existent to high. However, in many cases, that money could be spent more effectively; we often see clients using cloud in a capital-intensive way that mimics how they used to use data centers. Remember, you don’t own cloud servers, you just rent them. So your usage and costs should be elastic, expanding and contracting with workload. That’s a core benefit of cloud.
That’s why one of the first moves to consider is optimizing your cloud spend. An easy example? Shut down the testing environment when you’re not using it. And consider different types of storage for different classes of data: highly-available and responsive storage for transactional data, and higher-latency and lower-cost for data not needed immediately. You should also scrutinize the bills from your cloud providers. These are often extremely complicated, running into millions or hundreds of millions of line items. FinOps for cloud can help track and optimize this spending while reaping major benefits on top. For instance, a robust FinOps capability can prevent spend commitment mistakes, and help you switch from a â€œlift-and-shiftâ€ approach founded on a datacenter mentality to a true cloud-centric model that realizes cloud’s full potential.
2. Double down on automation
If your IT budget, and maybe your business as a whole, is under pressure in the current environment, then automating more business processes is a natural step. But it’s important to implement automation for the right reasons, looking beyond the obvious cost savings to consider how it contributes to broader enterprise strategy. Of course, automating procedural, repeatable tasks via robotic process automation (RPA) not only cuts cost but frees up talent for higher-value, more strategic activities, enabling the business to do more with fewer people and address talent supply issues. The results? Higher efficiency and better outcomes. While many organizations are already implementing RPA, few are doing it at scale, and most haven’t yet fully embraced the more advanced â€œintelligentâ€ automation opportunities via artificial intelligence and machine learning that can unlock true end-to-end automation. Given this, the CIO should become the driver of enterprise automation.
3. Be open with suppliers on budget constraints
Try talking to your suppliers about the cost squeeze you’re facing, and you might be pleasantly surprised at their response. If you treat them as true partners and give them the opportunity to make suggestions for ways to save costs, they’ll probably come back with creative ideas. This reflects our own experience: we’ve worked with clients through downturns in industries like steel and utilities, and we know they expect us to offer creative ways to do things more cost-effectively. Whether it involves outsourcing, insourcing or something else, your suppliers or partners will often have great ideas.
Many organizations are over-licensed and oversubscribed on software, pushing costs higher than they need to be. There are several ways to tackle this problem. One is to take steps to optimize subscription fees on expensive licenses by verifying the user base uses a software product or even separately licensed/subscribed features. Another is to identify savings opportunities from using open-source components instead of commercial software. Further, most software license agreements include annual processes to reset maintenance costs when consumption patterns change. Then of course there’s a rationalization of products that are functionally redundant or can be archived/retired. While CIOs can carry out this license management themselves, a more effective approach could be to use a partner with specific expertise, who can detect in real time where an application is being used, and help recommend approaches to reduce spend.
With those four moves in mind, and in the drive to reduce costs amid ongoing uncertainty, CIOs may be tempted to cancel a project in its final stages to stop spending. But if that project involves retiring an asset or getting rid of a data center, companies should press on for multiple reasons. One is that by stopping, they’ll prolong technical debt into the future for a short-term benefit. Another is that once finished, maintenance costs, like on-premise servers, will go away. So don’t stop short of the finish line and neglect to collect the savings.