Companies are shifting spending to support their critical IT initiatives

Increasing spend efficiency and cutting waste are challenging with respect to gaining visibility into costs and managing IT spend effectively, according to Flexera survey.

Survey respondents are IT executives working in large enterprises with 2,000 or more employees, headquartered in North America and Europe, encompassing industries such as financial services, retail, e-commerce and industrial products. More than half are C-level executives.

Managing IT spending

The top challenge to managing spend effectively, cited by 86 percent of respondents, is the large number of manual processes. Considering the magnitude of potential savings, tackling these challenges can have a major impact on the bottom line.

“With this survey, we wanted to gain more insight into how enterprise organizations are embracing digital transformation, cybersecurity, cloud computing and other initiatives,” said Jim Ryan, President and CEO of Flexera.

“By doing so, we can then see if/how these initiatives are providing a competitive advantage for their particular industries, as they require sizeable investments in technology.

“The survey found that 8.2 percent of respondent revenue is being spend on IT,” Ryan continued, “but the return is dubious at best. It’s likely that many of these investments aren’t attaining maximum ROI, and we identified that 30 percent or more of technology spend is actually being wasted.

“With the increasing uncertainty of U.S. and global economies, enterprises need to be prepared to manage their operations and finances when—not if—the next downturn kicks in. Proactively being able to dial IT spend up or down is a tremendous opportunity, and there is never a better time to address a potential problem than right now.”

Average spend

Overall, survey respondents’ average IT spend was 8.2 percent of revenue, with organizations in technology, financial services, retail, consumer products, transportation and healthcare industries all reporting IT spend considerably higher than the benchmark of four percent. While respondents estimate that 12 percent of IT spend is wasted, industry experts put the number at 30 percent or higher.

Top challenges in gaining visibility of IT spend are

• Reporting on spend by business service (61 percent)
• Collecting IT spend data (43 percent)
• Reporting on IT spend by application (38 percent)

Top challenges in managing IT spend

• Too many manual processes (86 percent)
• Ensuring spend efficiency/eliminating waste (89 percent)

Top IT initiatives are digital transformation, cybersecurity and the shift to cloud

Cloud spend has now surpassed on-premises software spend, with 22 percent going for on-premises software and 25 percent for cloud, including software as a service (SaaS), infrastructure as a service (IaaS) and platform as a service (PaaS). As they migrate to cloud, 65 percent of respondents plan to reduce the number of data centers next year.

With the shift to cloud, AWS was cited as the largest vendor of 10 percent of participants – behind only Microsoft and SAP. Over 80 percent of respondents plan to increase SaaS and IaaS/PaaS spend in the next year. More respondents expect to increase their use of cloud-focused vendors, with AWS and Microsoft topping the list.