Why is IT Cost Optimization top-of-mind for almost every CIO and CFO? It’s because operational IT costs are out of control. At their recent IT Financial, Procurement and Asset Management conference, a leading analyst group quoted the growth of operational IT costs at 6.4%, or four times GDP. This does not include any spending on innovation; it’s simply to keep the IT “lights on.” Organizations are searching for IT cost optimization tools that can drive operational costs down. In addition, IDC recently published statistics showing that IT infrastructure outsourcing costs had grown to over $75bn in 2012. IDC also predicted that SaaS tools would make up 60% of the $108m cloud services market by 2017.
The Drivers for IT Cost Optimization Tools
In this series, we’ll explore IT Cost Optimization as driven by the need to cut IT operational costs. In Parts 1 and 2, we will look at some reasons why IT costs have gotten out of control. In Part 3, we’ll look at what’s missing from current IT operational cost cutting efforts, and how Scalable’s Asset Vision can help mitigate these rises.
The two examples below, of six examples total, come as a result of recent changes in delivery and purchasing models, or increased financial scrutiny in the wake of the great recession.
Cloud Technologies Make Adding Compute Resources Trivial
Public and private cloud systems enable “one-click” compute resource provisioning or rescaling. VM sprawl, cloud instance costs and licensing liabilities can quickly add up. In the past when organizations needed more computing power, a defined acquisition process, with layers of approvals would ensue. The resulting computing power would arrive in physical form. Stated differently, it was almost impossible for computing power to leak into an organization under the radar of IT procurement. With services such as Amazon Web Services, it is utterly trivial to deploy the kind of processing power that, just a few years ago, would require a mainframe to show up at the loading bay.
SaaS Tools Leave No Measurable Footprint Behind the Firewall
Traditional licensable software deployments leave registration information that can be detected by inventory tools. SaaS tools leave no such footprints. It is not only easy to add costs, it is very difficult to detect when those costs have been added. If IDCs numbers are to be believed, costs of SaaS will be material part of a software budget in a few short years. Unless IT can get control over SaaS provisioning, this SaaS incursion with accelerate exponentially as folks realize just how easy it is to add capability – or worse still add licensable capability without knowing.
Part 2 will continue the discussion of reasons for the incredible increase in IT costs without a corresponding increase in spending on innovation.