Cost-saving took on new meaning to many business leaders this year to help companies bounce back from the pandemic.
Technology spend has seeped into every department, thinning the distribution of IT budgets. As CFOs and other leaders start to make IT spending decisions in their own silos, the once holistic view of spend breaks down.
Fragmentation of IT spend across the organization ultimately hurts many companies' bottom lines, but standardizing those efforts can reduce cost without undermining active initiatives, said Duncan Jones, VP and principal analyst at Forrester, during a panel at Forrester's Technology & Innovation Global conference on Thursday.
"One of the challenges with cost reduction is that so much of the technology budget is now actually spent by business leaders without IT's involvement," Jones said.
When the tech budget is spread across departments, it becomes fragmented and difficult for IT leaders to manage. In an effort to rebuild the holistic view of IT budgets, CIOs and management can experiment with standardization efforts that rein in the spend.
To start, cutting idle applications eliminates waste created by fragmentation because it consolidates the budget to only what it actually uses. Acquiring the most commonly used apps from the same provider and expanding the footprint of the best providers to seek out discounts can also standardize IT spend without interrupting ongoing projects, according to Jones.
With that in mind, be wary of over-standardizing.
"We want to standardize for cost efficiency, but we have to avoid getting overly dependent on any vendors, if they're not going to treat us fairly as a result," Jones said.
Vendors largely act as key partners to IT management throughout the acquisition process. Some caution about vendor intention keeps IT departments from being taken advantage of, but vendors can also keep IT teams at peak performance.
"If what you want is flexibility, agility and resilience, if what you want is to get a product or service to market quickly, then clearly it makes sense to take all the advantages and all the help you can get from the partners you're working with," said Paul Miller, principal analyst at Forrester, speaking on the same panel.
When replacing fragmentation with standardization, IT management worries too often about becoming "locked in" to a vendor or application, according to Miller. But those choices aren't so binary and can cause analysis paralysis for leadership concerned about damaging the bottom line.
"Get away from the idea of talking about lock-in," Miller said. "Most of the time, it doesn't exist. However, every choice has consequences, whose consequences carry costs and bring friction to your ability to innovate and to do new things."
Opportunities to renegotiate exist in every contract, no matter how stuck the signee may feel. Worrying about becoming locked in to a vendor or service can squash the opportunity to reduce cost along the way.
"There's always negotiation leverage available to you, even with a very deeply-embedded vendor where maybe there's even no competitive swap out option," Mark Bartrick, principal consultant at Forrester, said on the panel.
Armed with an understanding of contract timelines and sales representative motivations, technology budget teams can work with vendors to cut prices. Early or late contract negotiation can pressure vendors to make a deal as they work to meet fiscal year goals, according to Bartrick.
If commission is involved, getting a sales representative to open up about their interests in the deal may also help secure a better price.
"You can sometimes find that rep will give you a bigger discount on what you're looking to do so long as they get a bit of something in it that pays them commission," said Bartrick.
