Transparency in tech spend turns costs into strategic assets

Chief Financial Officers need to be involved in IT procurement and must have complete visibility into IT spend, to allow them to drive investments that offer business value.

This is according to panellists that participated in a webinar on IT Financial Management (ITFM), hosted by MagicOrange and Microsoft in partnership with ITWeb.

Welela Dawit, Chief Finance Officer at Microsoft South Africa, said: “A lot of IT conversations tend to happen only with CIOs, but CFOs have to be involved too. They are the custodians of the investment in resources. They need to look at costs as a strategic asset and understand what the organisation’s investments can enable in terms of business value.”

To give CFOs insight into costs, they need advanced ITFM solutions that offer visibility of IT resources, their costs, and consumption, panellists said.

Dawit said: “Transparency is important for cost management, control and assessing ROI. IT spend tends to be one of the largest lines of Operational Expense (OpEx). Because of the complexity and diversity of IT spend, it’s hard to get visibility and transparency on where that precious spend is going. It’s not easy to understand at a workload level, or to be sure the spend is going to the infrastructure and solutioning you actually need.”

Controlling cloud costs

Ky Ox, Azure Core Lead at Microsoft, said the cloud, artificial intelligence (AI) and emerging technologies were transforming business and adding value for customers, but that this transformation could add complexity and cost to business. “In moving to the cloud and gaining unlimited capacity, there can be unpredictability of cost. Considering this, you need the appropriate guardrails and governance in place so you don’t have runaway costs,” he said.

Ox cited examples of areas where organisations could overspend when moving to cloud: “Overprovisioning is a legacy of the on-premise world, but a mindset change needs to happen when we start architecting for the cloud. Legacy application migration can be expensive, so you need to transform and modernise applications to deliver the same business results using the capabilities of the cloud. To get value you need to make sure your input is right – there are many cloud-native systems to ‘atomise’ your infrastructure.

Cloud Centres of Excellence offered a solution, Ox said: “Some of the most successful organisations in the cloud have Cloud Centres of Excellence who manage costs and take advantage of upgrade cycles in the cloud. It’s also important to use the cost management tools that the hyperscalers have built in.”

Dawit added: “The cloud can save costs, if it’s done right and you manage the migration properly. On average, customers save roughly 30% of their IT costs by shifting to cloud, saving on space, cooling, and the Capital Expenditure (CapEx) burden and shifting these expenses to focus on business strategy. The expenses of the actual migration must be considered as part of the business case.”

She said: “What the cloud gives you is a flexible expense structure that allows you to scale with business growth, you can right size and quickly scale up, without having idle resources at quiet times. You shift from fixed assets to cash, and from CapEx to OpEx. The CFO needs to have to manage cost allocations to drive the right level of operational efficacy and invest for the future, unlocking capacity for strategic reinvestment.”

ITFM with MagicOrange

The panellists outlined MagicOrange, the market’s most advanced ITFM platform, which is built in the Azure cloud and transactable on the Azure Marketplace.

Dawit said: “MagicOrange is a game changer for my customers – it enables transparency in costs and allows them to optimise costs in one place so they can invest in other capacity and infrastructure.”

Blake Davidson, Chief Customer Officer at MagicOrange, said: “ITFM makes sure that technology spend delivers the best return possible. With Gartner reporting that technology spend is now around $4.7 trillion dollars worldwide, it is important to ensure that technology investments are delivering the best value.”

He noted: “Many people think cost optimisation is just cutting the bottom line. But it’s about value and returns. ITFM is about great returns and redeploying costs. It starts with understanding what is in your domain, what costs there are – unpacking the ‘black box’ –and actively starting to manage that.”

David Harding, Chief Executive Officer at MagicOrange, explained: “ITFM is the practice of managing an organisation’s IT expenses, as a subledger to an organisation’s ERP system. ERP is two dimensional, and built very much for external, rather than internal, reporting. ITFM brings in a third dimension – consumption – so organisations can understand the total cost of ownership.”

He added that cost transparency needs to lead to accountability and responsibility in the business, which results in business value.

“Cost optimisation isn’t a short-term action. It’s sustainable redeployment and optimising of tech spend over a period of time, for the long term,” Harding said.