AgileIT CEO Nick Truran highlights three IT areas to focus on to achieve significant savings.
South African companies can make significant savings and materially improve their bottom-line performance by making simple changes to the way they manage their information technology (IT) operations.
It is well known that the global trend of large corporate companies is to spend millions annually on technology (up to 50 per cent of all business spend in some instances). However a 2016 study by Genpact Research Institute estimates that nearly 70 percent of all IT spend may be misallocated.
According to Gartner, total global spend on IT ran to an estimated USD 3.7 trillion in 2018, 6.2 percent higher than the previous year. Similarly spend by South African corporates is expected to increase to R303.46 billion in 2019, albeit at a more modest 3.9 percent overall increase over 2018.
Furthermore, Genpact Research also found that of the $600 billion spent on digital projects, almost $400 billion was invested on projects that fell short of required returns on investment.
Where does South Africa stand in terms of IT spend? Gartner says software spending in SA will reach R32 billion in 2019, an 11.4 percent increase from 2018. Most of this spend will be on cloud services, which will include software, platform and infrastructure in a bid to increase cost efficiencies.
Our experiences in assisting companies to optimise IT spend and overall ROI is to rigorously probe whether the current IT landscape is aligned to the business strategy and thus fit for purpose. When this is coupled with getting the IT department to start thinking of itself as a service provider to the business, four decisions can be made with regards to IT spend:
- It becomes possible to see where costs can be saved
- Technology elements to be “sunsetted” can be identified
- It’s possible to see where existing technology can be re-used
- We can identify which new investments need to be made.
Our belief is that this process can effect savings of as much as 20 percent on overall annual IT costs and on average add between R5 million to R10 million a year to the bottom line among larger corporates.
Where to find savings in IT
Our experience over many years has shown that a good place to start to find rapid savings is in the following three areas: storage, networks (connectivity) and telephony.
Storage: This is a significant area of waste among most companies, whose focus tends to be on operational execution and not on housekeeping. By rewriting and redefining policies and procedures around data retention, data storage and backup retention, small, smart investments can result in substantial savings. Older contracts also often relate to the outdated provisioning of storage systems. By simply restructuring these contracts enormous savings on recurring costs can be made.
As a practice, businesses should schedule regular reviews of their data classification, data retention, archiving and backup retention policies and procedures. In my experience, this is rarely done, if even at all.
Another rule of thumb is to evaluate capital investment carefully. Equipment is a sunk cost. I advocate pay for utilisation, rather than an outright purchase of infrastructure. Often companies oversubscribe on their capacity because of projected demand that is seldom realised or that could be dealt by overseeing that proper housekeeping is performed.
Networks and connectivity: Quick wins can be made on connectivity costs i.e. links to ISPs, branches and back up sites, among others. Start by analysing your current landscape and infrastructure and then consider:
- Converting from old network technologies to software-defined WAN/LAN services
- Eliminating complexity in carrier support by becoming carrier agnostic
- Eliminating legacy approaches
- Embracing cloud-based telephony solutions
- Eliminating physical hardware and embracing enterprise mobility
Telephony – Cloud-based platform: Modern cloud-based systems offer huge savings over traditional PABXes from call recording, to lead generation as well as Interactive Voice Recognition (IVR) as an option to some more costly customer-facing interventions. There are even lightweight workforce management solutions that will help enable true enterprise mobility and office anywhere initiatives.
There is a general perception within corporate IT departments that about 80 percent of the budget should be spent on existing operations and the balance on innovations. The irony is that poor utilisation of IT spend is holding these very operations back from digital transformation. Most organisations are so engaged in maintaining their legacy systems that in some cases as little as five percent of the budget gets allocated on innovation.
There is no doubt that when IT is aligned to the overall business strategy and effective focus is made on specific areas of cost – as suggested above – significant improvements in the bottom-line profitability of the company are almost guaranteed.
