The phrase technology expenditure often finds its way towards the top of the company income statement. It’s a phrase used by many but understood by few. It’s a phrase often targeted when it comes to cost reduction, but conversely targeted when there is a need to enhance business efficiency and/or enable business operations.
By Neil Buckley, MD of Apex BI
Technology expenditure relates directly back to the products, services and technology deployed throughout an organisation that support and enable daily business operations. It’s virtually impossible for any organisation to conduct its business effectively without some form of technology, especially now in the age of cloud based as a service solutions, digital transformation, artificial intelligence (AI) and the internet of things [IoT] changing the way we all live and conduct business. Therefore, it is quite extraordinary that so few businesses have a grip on this growing essential expenditure.
Not so long ago, the sum total of technology expenditure was fixed line voice and data, mobile voice and data and possibly some ad hoc IT expenditure. Now, APN’s, cloud and hosting Services, end user computing, security, software, hardware, internet of things (IoT), print and AI are some of the newer examples of components that significantly contribute towards technology expense spread – the trick is not to let it get out of control.
The challenges facing businesses today include: understanding what they are spending on technology; where they are spending it – clear identification of the specific area of spend; with whom they are spending it; and most importantly how the expenditure relates back to business performance. The latter is crucial because if you can answer that question you will gain valuable insight into whether you are overspending on tech solutions that are adding little or no value to your bottom line.
Security; compliance; efficiency; redundancy; connectivity; storage and user applications are just some of the forces driving technology expense management (TEM). Grasping the concepts that govern the management of it is the only way you can ultimately hope to control it.
Technology expenditure is on the rise as companies scramble for competitive position in a world where customers have access to comparative pricing and quality checks. Today’s tech savvy customers are also unforgiving when it comes to suppliers who drop the service or customer experience ball – even for a second. They move on to the next app, provider or technology, that is more to their liking.
Equally important, what businesses must begin to do is to understand how technology expenditure correlates to business key performance indicators (KPIs).
TEM platforms certainly provide much needed visibility into technology related costs, consumption, commercials and inventory. This in itself is of considerable value to any enterprise having to manage a complex technology environment including fixed line – voice and data; mobile -also voice and data – cloud and hosting; end user computing security; IoT and print services, etc.
However, what many TEM platforms do not do is to provide enterprises with meaningful views on how their technology costs interact and relate to business KPI’s. Using some simple organisational benchmarks, business metrics and meta data, TEM platforms can go far beyond just achieving cost and infrastructure efficiency KPI’s, they can actually expose really meaningful business flaws and opportunities.
Consider the below example, where two different business locations have similar technology spend and different revenue. Which one is right?