While budgets for CIOs are increasing, there is continuing pressure to clearly show that IT investments are helping organizations achieve their business goals.
According to Gartner, global IT spending is expected to increase by nearly 10% in 2025. This is being driven in part by the explosive use of AI in devices and software as well as the need to continually modernize the communications infrastructure, which includes physical and cloud-based tools and services.
In contrast, corporate budgets will see little change from 2024, with only a small increase in compensation, according to Mercer.
While this spending increase reflects the critical role of technology in business operations and goals, CIOs and IT leaders must implement a strategy to optimize IT spending throughout the organization.
IT ROI: Showing the Value
IT Return on Investment (ROI) refers to the financial return made on an IT investment. When correctly analyzed, ROI can help senior leadership identify areas to either reduce or increase spend, and to target spend so all investments in IT can support business goals.
IT ROI analysis includes:
- Establishing goals for IT investment – Identify IT investment goals such as reducing risk, improving efficiency, and increasing revenue.
- Calculating IT investment costs – Calculate all costs associated with IT investments, including staff, hardware, software, and managed services.
- Calculating the return on IT investments – Calculate the return on all IT investments, such as increased revenue or reduced expenses.
- Evaluating IT ROI – Compare IT investment expenses to IT investment returns, identifying areas to either dial-up or dial-back spend.
- Communicating ROI as a part of IT strategy – Communicate the results of your ROI evaluation to senior leadership, those in the business, and to IT staff.
Focus Areas for IT Cost Optimization
To help optimize your organization’s IT spending, consider including the following focus areas.
Cloud Cost Management
Spend on cloud services continues to increase in organizations across the globe, with Gartner reporting that spend will increase to $723 billion in 2025. This represents a 21.5% increase from 2024. With this large expense, it is important to adopt cost management practices.
Gain Consistent Visibility
Technology leaders should regularly speak with all managers from the business that leverages cloud services to make sure that use cases fit with the overall IT strategy. This will also allow business leaders to identify any areas of overlap and overpayment.
Employ a strategy to identify and manage cloud resources, such as through tagging. Tagging is creating descriptive metadata about the cloud resource, making it easier to search for resources and enabling improved utilization of current cloud resources.
Analyze Spend and Create a Budget
Cloud service providers can use different cost models and may also apply discounts during downtime. Along with the leaders in the business, determine how they expect to consume cloud services to provide just the right amount resources.
Once a budget is determined, communicate it to senior management. Hold leaders in the business accountable for the levels that have been set and take advantage of any discounts offered to bring down costs.
Measure Costs Through KPIs
When measuring business outcomes, include key performance indicators to better understand cloud costs. Consider including the following KPIs:
- Cloud unit cost – such as cost for 1 hour of time or one gigabyte of storage
- Cost per user – the average cost per user
- Discount percentage – the percentage of cloud utilization that leverages discounting pricing options
Projects and Portfolio
For many years, IT leaders have invested in software to track project activities and spending, although they still struggle with obtaining visibility on all resources, risks, and dependencies. This can lead to continuous reviews or canceled projects that appear to not be delivering value.
Keep in mind the following best practices when optimizing project delivery and portfolio management:
- Maintain in one place key project information for all projects in the organization.
- Communicate using common and consistent language.
- Align all projects with business goals.
- Establish enterprise-wide thresholds to notify business leaders when schedule, people, or finance thresholds are exceeded.
- Establish regular project and portfolio reviews with senior leadership to serve as a steering committee.
Managed IT Services
IT leaders can optimize cloud spend, staffing, and other services with the help of a strategic partner. Through collaboration, they can focus on more than just certain transactions and one-off projects to create a lasting relationship.
When viewed as a strategic approach, partnering with a managed service provider like Cox Business can provide several benefits, including:
- Cloud optimization – Consider adopting a cloud-first strategy, where resources scale to meet your consumption requirements. Managed service providers can monitor use and identify areas to reduce costs.
- Automating processes – Automating and optimizing routine tasks can improve operations, helping the organization to reduce complexity.
- Monitoring and reporting – MSPs typically have tools that allow organizations to monitor performance and spend, facilitating improved decision-making regarding resource allocation.
IT Process
IT processes are, in most cases, no longer just in the realm of IT. As more organizations adopt enterprise-wide digital goals, it is very important that IT and the business are aligned to deliver on those goals.
Technology and business leaders have been increasingly adopting several ways to improve processes and operations:
- Process automation – Continuously look for opportunities to automate. Some ideas include real-time dashboards to track the use of digital resources and system performance, as well as the use of software that enforces policy and budget through permissions.
- Agile/DevOps – To accomplish objectives faster, consider continuous delivery of IT projects through iterative development and testing. With development and operations teams continuously testing and using new functionality, faster outcomes are delivered with fewer errors.
- AI knowledge management – Creating, sharing, using, and managing organizational knowledge used to mean searching through files and labels that may not have led to correct answers. When leveraging AI, questions can directly lead to summarized answers as well as links to other material if further clarity is needed.
Conclusion
Optimizing IT spend requires a strong relationship between technology and the business. As a part of your strategy, consider using managed IT services as a cost-effective alternative to in-house IT staffing.
Connect with Cox Business so your organization can achieve greater ROI with cloud cost optimization, increased automation, and strategic IT planning.
