Tech Budget Optimization: 5 Strategies to Build Resiliency
To say 2020 hasn’t been easy for many businesses would be an understatement. The COVID-19 pandemic has reshaped almost every industry across the globe. In many cases, the newfound need for remote work and online tech adoption to unfold at a far faster pace than many organizations had foreseen.
While most companies intend to make their new tech adaptations a part of a permanent plan, according to research from McKinsey, the race to innovate during the pandemic may have left many companies with a tech stack filled with software that is either too expensive or does not add enough value to make the lower initial price tag worth it.
Organizations that rush their implementation processes to meet the moment may find themselves in tech debt. Tech debt is the idea that poor-quality or badly implemented software will cost an organization down the road because of IT issues and lackluster performance, and therefore not represent good long-term value. According to a separate survey of CIOs conducted by McKinsey, between 10% and 20% of a total tech budget may have to be directed toward closing the tech debt. By paring down this number, you can create huge savings for your organization.
Some of the most common drivers of tech debt reported in the survey included the continued use of legacy software, a skills gap amongst employees and a mismatch between IT capabilities and a larger business strategy. While these issues may require your organization to identify processes that aren’t working, tech budget optimization is a great place to start.
Executing tech budget optimization
For many companies, the COVID-19 pandemic has forced both a reduction in total budgeting and a need for greater tech optimization. Leaders must then ensure their SaaS budget aligns with their company’s long-term goals and current financial reality, and every dollar spent must provide the most value possible. Every part of your tech budget, from software to personnel to partners, needs to be considered carefully.
When looking to optimize your tech budget, be sure to consider the following five factors:
- Your current industry outlook: Utilize industry analysis reports and independent research to see if your budgeting strategy is lining up with your peers and responding to outside influences. As 2020 showed us, projections can only be so reliable, so be sure to develop contingencies for the unexpected.
- How new technology aligns with your company’s long-term goals: What are your company’s priorities for the coming year and beyond? Prioritize budgeting for the tech solutions that help you pursue your most important goals. Ensuring your tech stack aligns strategically with your company’s broader goals increases efficiency and saves money in the long run.
- Whether your partners generate a positive ROI: Ensuring your software vendors deliver value is essential to budget optimization. Look critically at the inputs and outputs of your vendor relationships, then either consolidate or diversify your partner list based on your assessment to ensure you are only working with vendors offering real value.
- What the “soft costs” of a program will be: The costs of implementation go far beyond just the sticker price of a new solution. The time and training necessary to ensure your staff are using a solution to its fullest should be factored in as well.
- How many personnel you need for your tech solutions: As mentioned above, a skills gap can be one of the largest drivers of tech debt. While easily the most emotionally challenging thing to budget for, it is important to consider whether your organization is staffed optimally. That means right-sizing your staffing based on the realities of your tech stack and tech budget. While letting people go may be challenging, it could also bring more value in the long run.
Effective tech budget optimization doesn’t have to be a large hurdle. One of the easiest ways to optimize your tech stack is by replacing legacy software with SaaS programs that live on the cloud. These programs offer easier scalability, so you can continually adjust to meet the moment.