Ask any CFO what is crucial to business sustainability, and they will most likely respond that it is cost management, with the focus typically being on cost-cutting exercises.
But the digital era has brought an entirely new perspective that has added a multitude of internet of things (IOT) devices and cloud-based as-a-service charges to already sprawling ICT environments.
Cost management of businesses wishing to take advantage of digital transformation as a strategic growth enabler must look to taking charge of technology expense sprawl as opposed to simply applying a fear-based cost-cutting approach.
The management of technology and its associated expenses is a problem that technology expense management (TEM) software and tools can address by providing a tactical lever that generates savings that can be invested in driving growth.
TEM needs to be viewed as a strategic enabler that opens up opportunities for businesses.
It is not a reactive tool but is a proactive way to become more competitive in the global environment in the age of digital transformation and the internet of everything. The latter sees companies and virtually every employee using a range of communications tools, hardware, software and cloud-based services.
TEM services enable enterprises’ IT, procurement and finance departments to support and manage costs of large-scale corporate communications, associated IT services and their inventories − such as fixed and mobile telephony and data, cloud spend, and IOT connectivity. TEM services also include business intelligence and reporting suitable for supporting C-suite strategic decision-making. It is a specific but challenging function within IT and cost management.
TEM offerings are evolving as companies’ ranges of fixed, voice and data, and mobile devices grow and incorporate other services and communications-related asset tracking.
The impact of the uptake of the ‘as a service’ model
Technology expenses are showing exponential growth figures in tandem with the explosion of the everything as a service business model. One of the primary factors driving the software as a service (SaaS) market growth over the next few years is reported to be the rise in the adoption of cloud among SMEs.
TEM needs to be viewed as a strategic enabler that opens up opportunities for businesses.
Moreover, the increasing use of mobile apps is cited as an important force behind SaaS market expansion. Massive lines of credit are emerging as businesses embrace the convenience offered by everything-as-a-service.
Gartner reported in April that worldwide end-user spending on public cloud services is forecast to grow 23.1% in 2021 to total $332.3 billion, up from $270 billion in 2020. It goes on to highlight the fact that despite macro-economic headwinds, offerings that support or deliver public cloud services are experiencing tremendous growth. It notes SaaS remains the largest market segment and is predicted to reach $122.6 billion in 2021 alone. Infrastructure-as-a-service at 38.5% and desktop-as-a-service at 67.7% are predicted to see the highest growth in 2021, as CIOs face continued pressures to scale infrastructure that supports moving complex workloads to the cloud and the demands of hybrid workforces.
Obviously, this scenario has been compounded by the effects of the pandemic – but I will cover that separately.
Another research source reveals the global SaaS market is expected to grow by $99.99 billion during the 2021-2025 period, progressing at a compounded annual growth rate of over 11%.
Technology is cited as one of the leading organisational sources of expenses with a move away from long-term capex projects, with large capital outlays, to a model of short-term operational expenses with monthly contracts turning services ‘on’ and ‘off’ at will. This scenario is a recipe for disaster if not monitored – it requires a management platform capable of providing visibility and with that control over IT spend.
The effects of 5G
The potential downside of this super-high-speed connectivity is that users can consume massive amounts of data within minutes.
The major telco operators in South Africa have already rolled out their initial 5G offerings with users, and businesses, increasing their consumption of cloud-based services − this will undoubtedly lead to an exponential increase in technology spend.
The foregoing confirms that leading market analysts agree – tech spending is set to rise rapidly. What you must ask yourself is what are the possible outcomes of not managing technology expense sprawl? The answer to that is simple – millions of rands.
Large organisations particularly are losing control when confronted with a sprawling tech landscape. Many are still reconciling and allocating expenditure using antiquated spreadsheets and other disparate solutions, and in so doing are effectively putting their businesses at risk.
Enterprise-level organisations throughout South Africa are currently paying for mobile contracts for employees who have long since left, are running and paying for software nobody uses, are overlooking vendor service fees that were not agreed to, or failing to scale down on dollar-billed cloud services used for campaigns long-since completed. It’s a disturbing picture.
In my next article in this series, I will expand on the impact of COVID-19 with remote working and how TEM solutions are truly a business growth enabler.
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