More than one-third of desktop software spending and roughly one-third of annual investment in data center software, SaaS, IaaS and PaaS is wasted, according to a Flexera report.

Fewer than half of 500 IT executives surveyed over the summer said their organization tracks SaaS usage to align contracts with software needs, leading to app redundancy and unnecessary spending.

The struggle to implement best governance practices for SaaS use and spending remains a challenge, the report said. Only 35% of companies have complete visibility into IT assets and their impact on business.

The proliferation of “as a Service” technologies and public cloud infrastructure services poses a significant challenge for IT asset management teams tasked with cutting wasteful spending and reaping value from sourcing decisions, the report said.

The complexity of software vendor use rights was similarly cited as the major cost management challenge by nearly one-third of respondents.

Eliminating redundancy and waste isn’t always the easiest path to trimming budgets, but it’s often the best way to get the most out of each dollar spent.

While IT budgets have so far escaped major cutbacks, inflation has taken a bite and belts are tightening. Finding ways to reduce IT costs without eliminating tech capabilities is the target organizations are aiming at.

Companies have realigned reporting structures as pressures to meet demands for more efficient software spending.

The number of IT asset management teams reporting directly to a CIO or CTO has nearly doubled since last year, up to 43% from 22%, according to Flexera. 

And teams are finding ways to cut waste. The most successful software asset management teams were able to avoid purchasing new software licenses through the reuse of existing ones, the report said. Negotiating better vendor contracts and reducing maintenance spending on unused software were two other effective ways to realize savings.

Economic uncertainty driven by inflation, a tight labor market and foreign-exchange pressures may push CIOs to rethink investment priorities, but demand for managed services is expected to continue to grow.

The urgency to advance technology-modernization will drive demand for third-party managed services, helping firms digitize and reduce costs through faster integrations, access to talent and tailored services, according to analysts.

“I would say the market has never been as hot as it is right now,” said Steve Hall, partner and president of Information Services Group (ISG), a technology research and advisory firm. 

"With inflation and the possibility of a recession looming, we think we’re going to have more enterprises turning to outsourcing and managed services to lower their delivery costs,” he said.

In the second quarter of this year, managed services spending was valued at $8.8 billion, ISG said. But the firm is lowering its growth forecast for managed services to 3.5% for the year – down from its previous forecast of 5.1% – to reflect “the negative impact of foreign currency translation and inflationary concerns,” said Hall.

Gartner estimates of overall IT spending growth for 2022 were revised downward slightly from its first-quarter update – from 4% to 3% – in part due to economic pressures. 

The IT services market, driven by investments in business transformation, cloud migration and managed services, is expected to grow 9.6% in 2022, Gartner said. That’s down one percentage point from the previous year’s growth. In 2021, it said the total IT services spend was $1.2 trillion.

MSPs as efficiency drivers

Companies plan to digitize operations, which will generate ongoing demand for managed services, including more-efficient IT strategies.

Tata Consultancy Services (TCS), a global managed service provider that offers integration, cloud platform services and digital transformation services, said clients are partnering with the firm to consolidate vendor relationships.

“People are preparing for different scenarios,” said Amit Bajaj, president of TCS North America. “We see a wave of vendor consolidation … [customers] see an opportunity to work with fewer sets of providers, partly to get a better end-to-end service and to better leverage on scale,” he said.

Commercial real estate firm Jones Lang LaSalle (JLL) works with third-party MSPs and also acts as a managed service provider to other companies, offering real estate technology advisory services. It said demand for MSPs will likely remain consistent, though the focus might be different.

“In troubling times or in difficult times, perhaps your application of that strategy may change,” said Edward Wagoner, CIO of digital at JLL Technologies, a division of JLL. If firms need to become more efficient, they may need to partner with managed services firms to help implement these plans and fill skills gaps, he added.

‘Automation as a service’

Digital transformation is expected to continue to drive demand, regardless of economic pressures, said Brett Sparks, senior director analyst at Gartner. 

Automation technologies are a key part of this. Investing in automation will reduce the need for humans to perform certain tasks, and managed service providers can help facilitate that transition, he said. “[Companies want] advanced technologies to come in and start offsetting labor arbitrage and move into a digital arbitrage mindset so that they can reduce their spending year over year.” 

Accelirate, a Sunrise, Florida-based managed service provider, helps firms get up and running with robotic process automation software UiPath through license management, implementation and support. 

“I’m seeing an uptick in demand for support work because people are implementing more automations,” said Ahmed Zaidi, the firm’s co-founder and chief executive.

While MSPs come at a cost to companies – often through subscriptions – demand is accelerating because businesses can rely on them as a turnkey option to implement automation technologies, said Jason Warrelmann, VP of global services and process industries at UiPath.

“Most mid-market organizations – for example, your local hospital down the street – they want the benefit of automation, but they don’t have the people or budget to make that investment,” he said. “All they need to do is set up a connection … and let that managed service provider drive automation as a service.” 

From a CIO’s perspective, managed service providers could help companies lay the groundwork for a strategy to cope with a downturn, including addressing technical and process debt, said Sparks.

“I would spend more with them now where it made sense [so] I would be reducing my expenses going forward,” he said.

As a result, companies may seek MSPs to tackle a specific problem instead of using them more broadly to keep technology operations running across an enterprise.

“It’s more focused on outcome,” said UiPath’s Warrelmann. “If I want to improve my bad debt, I might find a managed service provider that’s focused on revenue cycle management. They’re very focused on specific outcomes rather than creating a program for everything in the enterprise.”

ORLANDO, Fla.— Thousands of technology-minded executives and analysts descended on Orlando, Florida for the Gartner IT Symposium Xpo, focused on what technology evolutions will mean for their business. 

Recession potential influenced conversations as CIOs are confronted with the need to do more with less. The question also emerged of who will be the true digital leader? 

Aside from the steady stream of trends and predictions, executives shared a number of tips that support technology strategies across sectors. 

Here are some meaningful takeaways CIO Dive heard from speakers at the annual event.

Consumer-led tech changes

Businesses can roll out new functionalities or applications and hope to spur natural adoption. But there are times when rapid changes in consumer behavior place the onus on businesses to respond. 

This happened to Michael Kors, which realized prior to COVID-19 that consumers were starting to prefer online shopping and wanted a different experience than they have in the stores.

"We transitioned to more of an API, microservices environment ... because now the consumer has the capability of being in a store, they can buy from anywhere, whether it's online or another store," said Akhil Bisaria, VP of IT, SAP and finance applications at Michael Kors parent company Capri Holdings. "In order to be able to do that, the plumbing has to be there."

Work tools to support diversity

Technology tools can be part of the strategy for companies looking to support diversity in its ranks. After all, businesses are responsible for equipping workers with the tools they need to do their jobs — which does not look the same for everybody.

Cindy Taibi, senior VP and CIO at The New York Times, said it has become really important to her as a leader to give people tools that they feel comfortable using.

"There's racial diversity, there's gender diversity, we all know about that," said Taibi. " Well, workstyle diversity, that's a thing too. And It's something that I spend a lot of time trying to focus on."

Decode your dashboard

Analysts and CIOs have warned against adopting technology for technology's sake. When it comes to dashboard solutions, the tools should provide understandable insight, or the effort will be in vain.

Ken Rogers, deputy CIO and chief knowledge officer at the U.S. Department of State, said that while the agency was modernizing and moving to the cloud, dashboards were an important part of keeping stakeholders in the loop.

“Dashboards are only good if they’re being used by your stakeholders,” Rogers said. “If they don’t meet their needs, you got to go back to the drawing board.”

Rogers suggested creating a glossary of terms so that stakeholders can get value out of the dashboards. 

This is especially important for budget planning: without relevant, understandable information, stakeholders will question how the current budget is being spent, potentially risking tech leaders credibility, according to Rogers.

Most companies have realized benefits from cloud migration, even if those gains have not had a big impact on balance sheets, according to a new report by advisory firm KPMG.

Four in 5 respondents said cloud adoption has been a success and two-thirds said they’ve advanced business strategy through cloud, based on the survey of more than 1,000 enterprise technology leaders.

Returns have been elusive. Two-thirds of respondents said they have yet to see substantial ROI on cloud spending.

There’s nuance in cloud adoption — layers of incremental achievements across business objectives. 

The gains play out over time, with some coming sooner and more easily than others.

ROI is a long-term objective, secondary to immediate gains in speed and agility, according to Marcus Murph, CIO advisory practice leader and principal at KPMG. 

“If I’m competing against the next startup in a garage in Silicon Valley, I've got to totally change my speed and agility,” he said.

Most companies — nearly 9 in 10 — have reached an advanced stage of cloud adoption, and one-third have exceeded objectives and realized substantial ROI. 

Yet, 42% said they are behind schedule in cloud implementations.

The upfront cost of migrating on-prem legacy technologies accounts for some of the delay in implementation and ROI, Murph said. That process has been more complicated than many companies expected.

“It’s not as easy as they thought initially because some of their workload applications are far more complex than they expected,” said Murph.

Another unexpected bottleneck has been an ongoing shortage of technologists.

Lack of tech talent is the top impediment to modernization, cited by 44% of respondents. Three in 10 said that internal skill gaps are slowing adoption of new technologies.

Outsourcing to managed service providers has bridged the gap, but that creates a new problem.

“I've heard a lot of CIOs and IT leaders say that they have very few developers or engineers that actually wear the badge of their company,” Murph said. “You have this predicament where, if you need talent to build the next thing, you may not have those people on your payroll.”

The cost of workforce upskilling should be offset to some extent by optimization gains, as companies move past initial migration and implementation.

“You would expect the cost line to begin to go down as you optimize and as your spending on migration and hands-on modernization goes down,” said Murph.

The good news for CIOs looking ahead to 2023 is IT budgets should escape cuts. 

Cloud spending is expected to decrease slightly but remain at roughly one-quarter of total IT budgets, based on Spiceworks Ziff Davis’ recent budget forecast. 

The narrative is far from complete, according to Murph. “I think of it as if it were a baseball game,” he said. “We’ve played three innings and there are six left. The third, fourth and fifth innings are going to be different from the first few.”

Nearly two-thirds of board directors are planning to increase their risk appetite through 2024, according to a Gartner survey. Last year, 57% of boards were planning to increase their risk appetite.

The most important investments in technology identified by board directors are AI and ML. The next key investments are software enhancements and data and analytics, according to the report that surveyed 281 board directors and corporate board members.

Almost all — 9 in 10 —  board directors say that digital business is now embedded in all business growth strategies. Boards are looking to the CEO as the primary leader responsible for driving digital initiatives, ahead of the CTO or CIO, according to the report.

If the CEO is the primary business leader and digital business is embedded in all business growth strategies, it only makes sense for the CEO to be responsible for driving digital business growth. 

However, this is not a small change. 

“It’s not enough to be seen just as a technology leader and business secondary,” Partha Iyengar, distinguished VP analyst at Gartner, said. “So that transition, I think, has become much sharper and more pronounced with this shift to the CEO calling the shots in digital business; it is all about the business with the digital part being a key enabler.” 

The change will be more pronounced in technology-heavy industries, such as banking, retail, telecom and healthcare, according to Iyengar. 

“So that’s being turned on its head, where technology defines the competitive realities in the industry,” Iyengar said. 

Mobile capabilities within the banking sector have become more and more the norm, pushing the industry to reimagine the value technology can bring. 

Truist opened a technology center in June that handles nearly six million client interactions, 87% of which are digital, every day. Citigroup announced in July it had boosted its technology spend by 14%. In June, State Street said it would be transferring funds from run-the-bank tech spend to digital transformation.

Banking is just one example, but the results are profound. CIOs and other tech leaders will be working closely with the CEO to drive digital growth, or risk their business falling behind. 

Boards recognize this, as well, which is why they are planning to increase their risk appetite even as record-inflation results in lower spending power. 

These headwinds are exactly why boards are looking to increase their risk appetite, according to Iyengar.

“So when you put that as the context, at the end of the day a business cannot say, ‘I’m not going to make decisions until the fog of uncertainty lifts,’ because that’s not going to happen anytime soon,” Iyengar said. “The only other option that boards have is [thinking] how do we get more comfortable making decisions in a major context of uncertainty where we can’t wait for bulletproof business cases and absolute ironclad ROI guarantees.”

This requires a shift from looking at risk as a threat to risk as an opportunity, Iyengar said.

Cloud migration is not a one-way-street, according to a report commissioned by Veeam, a data backup, recovery and management software company.

The vast majority, nearly 9 in 10, of more than 1,700 IT leaders surveyed said their companies brought cloud workloads back to their data center for one or more reasons, including development, cost, performance optimization and disaster recovery.

Shifting workloads multiple times between data centers and public and private clouds complicates security. It can make it harder to recover from data breaches, ransomware and cyber incursions, according to the report.

Data may be the substance fueling the latest gold rush, but it’s far more ephemeral — and harder to protect — than your average precious metal.

Most companies take measures to protect against breaches and plan for rapid recovery. But tracking workloads can be difficult in a hybrid cloud ecosystem where data can move from on-prem servers to multiple cloud platforms.

Nearly half of respondents said their company had brought applications and other workloads developed in a cloud into an on-prem environment, and 43% had reversed workload migration, moving them back to a physical data center from the cloud.

While nearly every organization said they rely on cloud services as part of their data protection strategy, one-third do not backup cloud-hosted file shares and 15% neglect their cloud-hosted databases, according to the survey.

The cost of security is growing, too.

Enterprise security and risk management spending is forecast by Gartner to grow 11.3% in 2023, with cloud security as the largest spending segment.

The market for cloud access security and workload protection will grow more than 25% to reach $6.7 billion next year, according to Gartner.

The price of failure is also high. The average cost of a data breach reached a global high of $4.4 million this year, according to IBM. American companies paid an average of $9.4 million per incident. 

Cloud-based services were responsible for 45% of breaches in the 12-month period ending in March 2022, according to IBM.

Faulty assumptions are to blame for some of the confusion. When companies deploy “as a Service” features, they may, incorrectly, believe that built-in “undo” functions and server resilience measures are sufficient, the Veeam report said.

For commonly used enterprise applications, such as Microsoft 365, the problem is less severe. Only 4% of respondents rely solely on the built-in recycle bin or undo capabilities of Microsoft 365 for backup, and more than 2 in 5 use Azure Storage to ensure recovery.

Raising Cane's began as a chicken finger quick service restaurant with a single location on campus at Louisiana State University. Today, almost 25 years later, the chain supports 700 restaurants with 50,000 employees across 33 states.

To scale systems and software, Raising Cane's looked toward its vendors for support and guidance, Vincent Severns, SVP of IT at Raising Cane’s, said during the Gartner IT Symposium/Xpo 2022, in Orlando, Florida. 

With over 140 integrations and expansion into other states, each with different regulations and labor laws, the restaurant was looking to streamline their services and increase efficiency and visibility of everyday operations within the restaurant.

Turning to enterprise management cloud-based software company Workday, Raising Cane's was able to customize, tweak processes and roll out HR services, from benefits to payroll. 

“Like most organizations, a lot of our stuff was on Excel, paper or Word documents, but the systems we did have, we started to see them actually start to break in the weirdest ways,” said Severns. 

One example of this was the accounting system they were using had a life insurance tax calculator that could only hold up to 32,000 people. For a while the system worked, but eventually it stopped, leaving the company to search for alternatives. 

“So I guess that was about 2014 or 2015, somewhere in there, when we started to really run into some of those obstacles,” Severns said. “And then that’s when the realization was we need to do something different here, we need to get a true enterprise-class system in place that will help us grow as a business.”

Since tapping Workday, the restaurant has started to venture into piloting and adopting other technologies. During the pandemic, the company built and launched a mobile app for customers. 

The mobile app used geolocation technology and kept mobile app orders in a queue until the customer hit a certain mileage near the store. This let employees prioritize orders and kept the food hot and fresh for customers. 

More recently, the company has piloted drone delivery technology through Flytrex, a drone delivery service company. 

While the company hasn’t been advertising the service, it has gotten good feedback from customers and is looking to start adding signage around stores where the option is available. If the positive feedback continues, Raising Cane’s is looking to integrate the service in its own mobile app, according to Severns.

Inflation will help push cloud spend upward in 2023, according to a Gartner report.

Spending on public cloud is expected to hit $591 billion next year, up 20.7% from this year’s $490 billion, Gartner forecasted.

The drive to save through cloud efficiency is running up against the drag of rising costs, creating a push-and-pull dynamic. “Organizations want the benefit of cloud, but they can only spend what they have,” said Sid Nag, VP analyst at Gartner.

Higher energy costs, a tight labor market and global supply chain disruptions are three big budgetary bugaboos driving inflation and pushing companies to trim budgets. 

At the center of the macroeconomic storm, cloud looms large as both an area for increased savings and spending, according to Nag.

The 20.7% increase in cloud spend forecast by Gartner, an uptick of almost two percentage points over 2022's growth rate of 18.8%, reflects inflation’s push-and-pull impact. 

Companies have learned that cloud, when strategically deployed, can be a cost saver. But even cloud is susceptible to inflation. 

On one side of the equation, the cost of cloud services and tech talent have gone up, Nag said. On the other, the inflation rate, which Gartner forecasts to be 6.5% heading into next year, has outpaced the 5.1% rate at which IT budgets are expected to grow.

The net result is less buying power, or more dollars spent for each cloud service — not all of which are created equally.

Cloud infrastructure services, or IaaS, will experience the highest end-user spending increase, according to the report, achieving a growth rate of 30%.

In contrast, cloud application infrastructure services, or PaaS, and software services will experience more modest growth of 23.3% and 16.8% respectively.

There’s push-and-pull between SaaS and PaaS as well, Nag said. Software services require companies to have skilled technicians on staff, while PaaS includes automation technologies that can reduce staffing needs.

The big cloud companies have already signaled their intention to reduce customer costs, despite declining revenue growth.

AWS is “working with customers to lower their bills,” Brian Olsavsky, Amazon’s CFO, said during the company’s earnings call. Microsoft CEO Satya Nadella said Azure is helping customers “do more with less” during a earnings call. And Sundar Pichai, Alphabet’s CEO, touted Google Cloud’s cost-saving advantages during a earnings call.

Companies that have adopted cloud are not likely to leave cloud, Nag said. Instead, they will be able to take advantage of the cloud consumption model, lowering CapEx while extending operation expenses through “as a Service” subscriptions. 

Some organizations are losing up to $1.3 million a year due to inefficient tasks weighing employees down, according to a report by Formstack and Mantis Research which surveyed 2,000 workers.

While automation might seem like the obvious answer, not all businesses are open to change. In organizations that have mostly manual, paper-based workflows, 3 in 5 respondents said their biggest struggle with implementing automation was a desire to stick to the status quo, according to the report. 

Formstack and Mantis identified financial services and software organizations as the most digitally mature compared to healthcare and education companies.

Inefficient processes can lead to wasted resources, time lost and unhappy employees. More than half of employees said they spend at least two hours on repetitive tasks daily, according to the report.

But if revamping an organization’s approach to technology was easy, everyone would do it. 

“Like most mindset and cultural shifts, the process takes time — it doesn’t happen overnight,” Chris Byers, CEO of Formstack, said in an email.

The amount of time transformation takes will depend on several factors, including the size and scale of the organization. However, the purchasing mindset of some organizations could deserve partial blame. 

More than 9 in 10 organizations with mostly manual, paper-based processes purchase tech as the need arises, according to the report. In these cases, tech is looked at reactively rather than part of long-term strategies or plans.

“This purchasing mindset leaves less digitally mature organizations with piecemealed tech stacks that don’t integrate well or adapt to business needs over time, lengthening and complicating the process,” Byers said.