The modern business world is increasingly driven by technology. As we move to a more interconnected and complex environment, the demand for suitable technologies is increasing – this is so much so that an average enterprise pays for approximately 1,516 applications. With a shift to remote working, we’re also seeing an overwhelming imperative to migrate to the cloud, and today, application costs are estimated to make up 80 per cent of the entire IT budget. Industry analyst Gartner has even forecasted that worldwide IT spending will reach $4 trillion in 2021.
The modern chief information officer (CIO) is responsible for understanding these technology costs and bringing them under control – and a key enabler of this is enterprise architecture (EA). By providing a strategic view of change, EA ensures alignment of the business and IT operations, facilitating agility, speed and the ability to make real-time decisions based on reliable and consistent data.
So, what are the common challenges of spiralling technology costs and how can EA help to reduce this pressure for CIOs?
As soon as costs start to mount, they don’t stop – and they can quickly spiral out of hand. What’s needed is a ‘single source of truth’ for IT costs. This comprises a web-based, central repository system that is able to manage and house all enterprise content in one hub. This enables organisations to conduct EA and portfolio management activities through centralised data.
More practically, EA provides the structure necessary to pursue cost-saving measures such as application rationalisation (the act of reducing the size of an organisation’s application portfolio).
Moving beyond these more general guidelines, there are also a host of small changes a firm could make. For example:
- Hardware and data costs can be shifted to the cloud to save money
- Server costs can be reduced by using virtual servers built into containers on a single machine
- Open-source applications can be sourced to prevent spending anything on some applications
- Nice-to-have hardware and software can be decommissioned in favour of only the core technology.
Mounting costs work both ways. Although people and technology are separate entities, the more complex a system becomes, the more people will be needed to build and maintain it. Indeed, CIO.com argues that personnel costs can be the predominant expense in the IT budget. Despite a lack of hard data in such an area, there’s no denying that there’s an enormous demand for IT personnel and skills.
But it’s not just IT. Detached teams also create hidden costs and further complicate managing budgets and investments. This represents another growth area termed ‘shadow IT’, where technology costs are driven by teams outside of the IT function.
One survey found 64 per cent of enterprises tolerate or sanction this approach, with 22 per cent of enterprises spending more than half of their budgets in this way. Investing in technology should not mean that costs spiral out of control. However, inevitably, enterprises make mistakes when it comes to making investment decisions. What’s needed is a way to gain valuable insights to make data-driven decisions to overcome these complexities. By providing a strategic view of change and ensuring the alignment of the business and IT, EA can deliver these much-needed valuable insights.
Applying the best practices of EA allows organisations to understand the technology costs which plague most IT functions. How? EA unlocks insights by allowing CIOs to make real-time decisions with dynamic heat maps, data-driven graphics and impact analysis tools. Not only this, but it also allows you to access powerful visuals that answer key business questions for the application portfolio, concerning business and technology fit, costs, functional duplication, and technology dependence.
By adopting and harnessing EA, CIOs can navigate their way through complex and expensive technology costs and personnel structures, including those teams outside of the IT function. With more informed decisions, EA allows CIOs to prioritise their spending to drive an organisation towards digital transformation in a more strategic way. Ultimately, smart insights turn complexity into a clear path forward.
Michael D'Onofrio is the CEO of Orbus Software
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