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One of the challenges of the post-pandemic IT climate is that business priorities have shifted from growing and hiring with a nearly unlimited budget to re-focusing on cost savings – including IT expense management (ITEM). Companies spent too much, and now business executives and boards are clamping down, wanting CIOs to throttle back spending.
A new study from Tangoe delves into IT expense management practices, comparing fully in-house programs, external third-party solutions, and hybrid models.
The study, conducted in partnership with Vanson Bourne, is based on responses from 500 senior IT and finance professionals in the U.S. and UK, who work for organizations with annual global revenues ranging from $500 million to $50 billion. All the organizations have an IT expense management solution in place. Below are some of the study’s key findings.
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Moving Forward Requires Investment
The challenge is that businesses need to move forward, and that requires continued investment.
As IT spending continues to climb, driven by the escalating costs of artificial intelligence, cloud, and mobile tools, organizations are feeling even more pressure on their budgets. This makes the ability to track and manage spending, govern expenses, and adjust IT budgets effectively a must.
The Tangoe study uncovered that third-party information technology expense management (ITEM) solutions foster more mature financial operations (FinOps) programs and offer faster business insights and savings than alternative approaches.
Furthermore, such solutions often incorporate automated processes that help reduce the risk and costs associated with IT outages. According to the data, this approach has proven to be five times more cost-effective than its alternatives, offering a superior method for managing IT expenses.
Cost Efficiency Disparity
One of the standout findings is the cost disparity between different expense management approaches.
Organizations using a fully external ITEM solution reported spending approximately $442,000 on average, which is remarkably lower than the $2.35 million incurred by those with a hybrid approach. By outsourcing, organizations not only save money but also free up internal resources.
Unlike in-house programs, which typically rely on vendor-provided tools, third-party providers offer specialized analytics platforms to identify cost optimization opportunities and managed services that help companies act on them quickly. This allows organizations to focus on critical investments and decision-making, rather than mundane tasks like invoice processing, expenditure analysis, and service adjustments.
Advanced FinOps Programs
Organizations that employ third-party solutions for managing IT expenses are more likely to have a mature FinOps practice, with 94 percent of organizations having a dedicated team for optimizing cloud spending.
Those using an external provider are more successful in deploying their FinOps practices, with 61 percent achieving full deployment compared to 53 percent of those using other methods. Having a FinOps program in place has also been shown to reduce spending on cloud infrastructure and software by 20 percent and 28 percent, respectively.
Improved Insights and Savings
Nearly all (99 percent) senior IT and finance decision-makers experienced significant benefits from outsourcing. Third-party ITEM solutions tackle common challenges related to data analysis, IT service inventory management, and manual processes.
Organizations using these solutions reported a 90 percent improvement in productivity and process efficiency, with 88 percent experiencing faster access to business insights and cost savings.
On average, organizations saved more than $10.5 million annually by outsourcing to third-party providers. Additionally, 88% of those with fully outsourced solutions achieved business insights and savings faster.
Automation is Necessary
Approximately 43 percent of IT expense management tasks are still performed manually. The consequences of manual dependency include service outages due to late payments, experienced by 85 percent of organizations. This can lead to substantial revenue losses and potentially halt operations completely.
According to the findings, automation decreased the frequency of regular outages from 41 percent in environments with mostly manual processes to 32 percent in those with automated processes—a 22 percent reduction.
Bottom Line: Third-Party ITEM Supports Cost Savings
As businesses expand and grow, IT expense management is a critical tool to boost profitability. Third-party ITEM solutions help organizations manage the complexities of modern IT expense management by supporting advanced FinOps practices, decreasing manual workloads, and providing considerable cost savings.
To learn more about how companies are driving digital transformation, see our guide: Digital Transformation Guide