Analytics are critical to managing enterprise budgets. We’re all familiar with the famous quote from Peter Drucker – “If You Can’t Measure It, You Can’t Improve It”. Unfortunately something so fundamental can also be very elusive in many IT organizations as it relates to the budget. A chart in Gartner’s 2Q17 publication, “Forecast Analysis on IT Spending, Worldwide” underscores the financial liabilities that many IT organizations are willing to accept. When it comes to not having complete, accurate and timely insight into what, where and how the full spectrum of their technology services are deployed, utilized and the cost. Having real-time insight into ownership, warranties, contractual commitments, as well as capacity and availability, is essential to making effective decisions around procurement, repurposing, retirement and replacement.
In the chart, Gartner breaks IT spend into five aggregated categories relative to overall IT spend. Based upon the Compounded Annual Growth Rate (CAGR) estimate for the next four years, the problems summarized above do not appear to be going away anytime soon. Instead, it’s becoming increasingly complex, especially with the adoption of mobile and cloud services.
- Data Center Systems = 4.92% of spend with CAGR through 2021 @.8%
- Enterprise Software = 10.09% of spend with CAGR through 2021 @8.3%
- Devices = 18.81% of spend with CAGR through 2021 @ 1.8%
- IT Services = 24.91% of spend with CAGR through 2021 @ 4.5%
- Communication Services = 39.63% of spend with CAGR through 2021 @ 1.3%
Of particular interest are two budget items: “Devices” (defined as PCs and tablets, mobile phones and printers) and “Communication Services” (defined as consumer fixed services, consumer mobile services, enterprise fixed services and enterprise mobile services). According to Gartner’s research, these categories comprise on average ~58% of their total IT budget.
What’s the organizational impact?
I continually witness how carefree organizations can be about not having intuitive real time insight into the critical elements of service inventory. Let’s say intuitive real-time insight could positively impact an organization’s perpetual cost avoidance by a simple incremental 10% improvement to these two expense lines. Parlaying this 10% impact from both lines to the overall IT budget would equate to a net overall IT cost reduction of ~6%.
The averages for IT budgets benchmarked to total corporate revenue can range from a low end of 1.8% in the Utilities industry to 12.7% in the Financial sector, resulting in an overall blended IT spend average across all industries of 3.3%. It’s also noteworthy to recognize that the adoption of Internet of Things (IOT) is going to generate a dramatic paradigm shift for Utilities who will increase their investments in mobile-enabled technology devices.
A company with $500 million in top-line revenue could conservatively realize a potential $650,000 annual cost avoidance by simply having the proper insight to identify areas for potential cost reduction (e.g. $500M *.033*.03963*.10). For example, this could include devices that aren’t actively in use or are perhaps underutilized. They could be replaced and consolidated with newer less costly services.
The power of analytics
Over the last few years, advancements in analytic technologies have resulted in nearly every solution provider embedding powerful reporting and interactive analytic capabilities within their software solution. These capabilities can offer intuitive real-time insight into all communication services and devices. As a result, IT managers are able to quickly assess the immediate state of their fixed, mobile and cloud services across the organization – while continuously monitoring and measuring actual consumption against benchmarked data. They can then take immediate corrective action as necessary.
However, simply embedding analytics technology into a platform by itself is not sufficient. Forcing the end-user to become an expert in the platform’s data model is a major time- consuming distraction to an already very busy and often overloaded workday schedule. Likewise, requiring an organization to share expense programmers who are not familiar with the subject matter is also not a cost effective or viable operating model conducive to dynamic and timely insight.
The real value of embedded analytics is derived from a well- architected user experience – one that provides intuitive, expert-based guidance leveraging intelligent learning algorithms. The solution provider can design the user experience so that they can quickly and easily recognize trends, identify anomalies and make recommendations based upon potential outcomes. Common taxonomies of IT technology business intelligence encompass all facets of expense, financial, usage, asset and service support management.
The bottom line
In short, as the consumption-based technology landscape (e.g. “cloud services” and “IoT devices”), continues to grow at record pace, it’s becoming essential for IT organizations to not only understand how and where IT budget dollars are spent, but to also demonstrate organizational impact and accountability. The right tools combined with expert architected reports and interactive analytics can provide the necessary insights and intelligence to make better business decisions.
Learn more about Calero, and its tools that were purpose-built with simplicity and user experience for the Communications Lifecycle Management market. Our service-based culture, built upon LEAN processes, puts discipline in place to support your business with the goal of driving predictable outcomes and improved performance quality. Better said, we say what we mean, and mean what we say.