A study of more than 2000 IT professionals across 18 countries uncovers the pressure businesses are under to cut IT spend
20 April 2023, London: There is no denying the significant pressure businesses are under to do more with less, due to the incredibly tough macroeconomic environment the world is facing. In the technology industry alone, 594 tech companies (https://layoffs.fyi/) have made more than 171,000 layoffs globally in the first few months of 2023.
The latest annual study from Crayon (https://www.crayon.com/) – the IT services and innovation leader – and SAPIO Research (https://sapioresearch.com/) has discovered that, because of this pressure, 90% of businesses list IT cost optimisation as a high priority for the business. This number increases even further in developing nations like the Philippines (97%) and South Africa (98%). Despite this, only 5% of businesses believe their IT budget is currently being fully optimised.
The research also found that 35% of global businesses are either actively assessing their IT spend or looking to cut it. This raises questions about where businesses will spend their budgets and how they plan to get the most out of their tech stack moving forward.
Prioritising the right business areas
Since the pandemic, business spending on technology has surged, with 56% of businesses spending more than USD 1 million per year on the public cloud alone. In the US, as many as 75% of businesses are spending at least this much, and in Norway, 12% of organisations are spending more than USD 25 million each year.
The report shows that the majority of this spend is on the technologies needed to support existing infrastructure across security (83%), data (81%), and cloud departments (76%) – highlighting priority business areas.
“The economic landscape is proving incredibly difficult for almost every business across the globe,” says Hayley Mooney, General Manager, Crayon. “Our research highlights that business leaders everywhere are struggling to find a solution that will help them to remain competitive while cutting costs. We know too that when it comes to IT spending, many businesses do not give it the same kind of scrutiny as other major line items.”
The research found that one in five (20%) global businesses leave IT cost decisions to CFOs and finance teams. This rises to over a third (38%) of businesses in Switzerland. Meanwhile, three in five businesses are implementing a FinOps practice, an evolving financial discipline that encourages business departments to collaborate on data-driven spending decisions. This practice is being widely adopted in the likes of Singapore (84%), Saudi Arabia (76%), Denmark (75%), the US (74%), and Norway (73%), highlighting the importance of cost optimisation across the entire business and suggests that organisations are trying to be more rigorous about extracting value from technology investments.
Despite this shift in focus, the biggest obstacle when it comes to optimising IT costs is a lack of time among senior decision-makers (31%). This is followed by a lack of knowledge on how best to cut costs (28%), and a lack of visibility across the organisation’s spending (28%).
“The change in strategy when it comes to cutting costs is causing businesses additional challenges,” continues Mooney. “This is because of the highly technical nature of this expenditure, making it difficult to manage. To overcome this and weather the storm both now and in the future, organisations must collaborate with a partner to draw the right lines between different technologies and platforms, business needs, contractual details and overlooked subscriptions, organisational structures, skills gaps, and much more”.