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December 26, 2023
4 Min Read
Olena Golubka via Alamy Stock
At a Glance
- CIOs need to learn to evaluate and strategize new ideas and initiatives.
- Cost-cutting measures become crucial as IT leaders look to streamline operations.
- Wise investments that leverage automation are keys to success.
Chief information officers have a responsibility to ensure their company spend corresponds with business priorities, and a top challenge for CIOs is optimizing IT budgets without eliminating or curbing growth and digital transformation initiatives.
Any new idea or initiative, (like AI investment projects, for example), should be evaluated and prioritized based on company strategy, roadmaps and objectives and key results.
Companies with savvy CIOs can implement forward-looking digital initiatives with the welcome side benefit of optimizing IT budgets -- the trick is to accurately account for the costs of each available course of action.
Kris Bliesner, CEO of Vega Cloud, explains in an email interview that cost visibility -- being able to tie IT costs back to specific applications, initiatives, business groups -- is critical.
“This allows CIOs to track the investments they are making across the enterprise and ensure that the trending of that spend in each area is headed in the right direction,” he says.
Another important part of driving alignment and trust across the broader C-suite is the ability to show unit economics for IT spend across business groups and applications.
“An example of this would be the ability to show the per gigabyte cost of storage across all clouds, applications and business units broken out by storage category,” Bliesner says.
Evaluate Hidden Costs
Sharon Mandell, CIO at Juniper Networks, says another area for IT leaders to evaluate is the hidden costs of using multiple vendors.
“Often, there can be unforeseen costs when working with multiple vendors, which can add up,” she notes via email.
She adds CIOs can optimize IT spend by implementing more rigorous, strategy-aligned software approval processes aimed at avoiding duplicative spend and ensuring contracts are rightsized for the business needs.
“The challenge and responsibility of CIOs is to be intentional with every dollar and investment by keeping the organization focused on the most important priorities instead of pursuing every exciting new idea,” she says.
Mandell says IT leaders should encourage a culture of innovation and ideation, but they must also balance maintaining a strategic focus -- and communicate these goals across their own team and other areas of the organization.
For instance, when looking at a new idea, IT leaders should collaborate with their business partners to put the concept into the greater business context and ask if it will result in a material impact or drive dramatic efficiencies.
Bliesner notes it’s also important to build and empower the financial operations (FinOps) team.
“Bridging the finance and engineering functions is hard work and you need both a team and a platform to effectively accomplish this,” he says. “When you do, you will be able to ensure and show that your cloud costs are being effectively managed.”
Axing Wasteful SaaS Apps
Bob Feller, chief financial officer at Auvik Networks, says one of the key areas where CIOs can control rising IT costs is to look for redundancy and waste, particularly among SaaS applications.
“Most organizations hastily adopted new SaaS tools during the quick transition to remote work in response to the global COVID pandemic, but not many have taken full inventory and reviewed these tools since,” he says.
Now, when cutting costs is the name of the game, IT teams must identify any new applications that were adopted through shadow IT or were bought as a knee-jerk reaction to the pandemic but have not been fully utilized since.
He says they also must look for redundancy in their environment, such as employees using (and paying for) more than one type of video conferencing or large file sharing tool.
“These need to be consolidated and implemented consistently to reduce waste,” Feller says.
Additionally, CIOs and IT leaders should carefully consider their vendors and determine if there are opportunities to consolidate services.
“This can not only help reduce costs but also improve efficiencies, as it’s often better to use a few preferred vendors for multiple services rather than buy point products from multiple different vendors,” he notes.
Strategic Investment in AI
Mandell notes AI and automation are changing how budgets are managed and spending decisions are made.
“Automation can streamline processes and reduce manual effort, contributing to cost savings,” she says.
When integrated effectively, AI-powered solutions can enhance decision-making and identify opportunities for optimization.
“With the help of emerging technologies, CIOs and other budget decision makers will have greater visibility into spend, helping ensure resources are allocated strategically and IT environments are streamlined,” Mandell explains.
Feller says before adopting any new technologies and solutions that claim to use generative AI, IT leaders must carefully consider how this aligns to existing challenges or goals.
“Where are your inefficiencies? What are your core business goals?” he asks.
If a flashy new generative AI solution doesn’t serve a specific and meaningful purpose, it’s best to put it back on the shelf.
“Don’t let technology wag the dog,” he cautions. “Find the real business problem first, then pursue the proper solution.”
About the Author(s)
Nathan Eddy is a freelance writer for InformationWeek. He has written for Popular Mechanics, Sales & Marketing Management Magazine, FierceMarkets, and CRN, among others. In 2012 he made his first documentary film, The Absent Column. He currently lives in Berlin.
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