How Organizations can reduce costs while adopting the Cloud and undergoing Digital Transformation

6 mins read

Owen Gan, Regional Vice President of Southeast Asia at Apptio, explains how and why CFOs and CIOs should think about their IT spending more carefully.

Qinthara Fasya, DigitalCFO Asia | 8 July 2021

Photo by @fabio on Unsplash

According to a recent Harvard Company Review Analytics Services study of 338 business leaders, 82 percent have boosted their spending in digital projects as a result of the epidemic. Respondents said they’re investing in technology and procedures that help them deliver new business apps and products faster, as well as preparing their workers for virtual and hybrid work environments.

Migrating their IT infrastructure to the cloud, where its capabilities allow organizations to grow and react to new business demands, is one way they are doing so. These transitions have been mentioned by decision-makers as costs to their businesses, but little has been stated about the expenses avoided by digitizing their operations. Owen Gan, Regional Vice President of Southeast Asia at Apptio, spoke with DigitalCFO Asia on how businesses can save money and use various frameworks to guarantee that the investments they make result in increased productivity.

Do you believe workers have become more comfortable working in virtual or hybrid environments in the last year?

In many industries, remote and mobile work arrangements have actually been the norm or on the rise for several years now. Tragically many of the industries requiring people-to-people interaction were partially or completely shut down during COVID in many regions, with the exception, obviously, of frontline health workers. 

So business models and infrastructure fundamentals were set for workers, consumers, and supply chain to work together virtually in most sectors prior to the pandemic

The quantum of the shift has been the issue – the IT funding mix across the communication chain beyond corporate campus infra has had to adapt along with bandwidth and significant security challenges. 

Apptio took a multi-pronged approach to help our customers, our communities, and our employees throughout the pandemic. 

We helped businesses, including our own, react and adjust by offering short-term contracts and solutions to help IT leaders quickly identify cost savings, re-plan their budgets, and track spend through continuous forecasting.

We are also helping businesses to minimize cloud spend and stay nimble and optimized around commitments. Cloud infra and app usage have understandably spiked even further since early 2020 as employees and customers have massively turned to mobile and Internet-based communication means. 

How do you believe the pandemic pushed many businesses to embrace digitisation?

The reality is digitization has been at the forefront of business strategists’ agenda well before the latest pandemic. Gartner already sighted “digital” as the top priority for FSI CIOs in 2019. The pandemic has taken this to even greater heights. Gartner’s research also confirmed that when unplanned disruptive events strike, business leaders magnify focus on two key priorities – 1. Cost Management 2. Digital Business Initiatives (see slide 4 of ppt to reference).

Regarding Point 1., leaders need to reduce spending, rationalize long-term projects without impacting keep the lights on (KTLO) services. The economic fallout from COVID-19, however, expanded the remit of KTLO: of respondents to an Apptio survey in May 2020, 64% of IT leaders said they had seen an increase in demands for technology, and a 29% increase in spending to support remote work. 

Survival, not growth, was imperative in 2020. Organizations are now prioritizing cost optimization (66.2%) and operational efficiency (33.8%). While wanting to emerge from current difficulties “stronger” and “more robust” is laudable, there’s a short-term reality: CIOs need to preserve cash-on-hand. With cash, organizations have the flexibility to survive the downturn; without cash, organizations will be forced to downsize employee operations (or, at an extreme, declare bankruptcy) to pay off fixed expenses. CIOs do their part by cutting costs—quickly.

We see Cloud emerging as a top focus, which is consistent with what the market is seeing. Spending on Cloud services has risen by over 38% to $35.4 billion in 2020, according to IDC’s Worldwide Public Cloud Services Spending Guide. At Apptio we help enterprises optimize their spending, utilization, and planning across Cloud infra and apps. Our Cloudability suite helps CIOs and CFOs to manage Cloud spend. The exciting launch of our Cloudability Shift last month gives leaders the ability to analyze the real cost of Cloud migration and even compares which Cloud provider is the best fit for your specific workloads – taking into account your business and dependencies.

How can businesses ensure that the IT financial data they are consuming is accurate and relevant?

In Asia Pacific over the last 18 months, we have seen an increasing number of leading companies adopting proven best practice frameworks to benchmark how they are performing and what they are measuring. These independent third-party frameworks include global Technology Business Management (TBM) Council standards such as the ATUM model, and FinOps Cloud Management principles to bring governance and structure to Cloud infra management. The TBM framework for example defines the tools, processes, data, and people needed to enable evidence-based decision-making around managing, planning, and optimizing technology investments. Using Apptio’s software helps organizations incorporate the TBM framework and migrate from paper and spreadsheets to data, dashboards, and insights. When you improve how the data is collected, you get more accurate insights.

No one ever complains about not having enough data. The challenge is always how to organize and view it in a way that matters to you in a manner that helps senior managers to make better business decisions faster. We released Self-Service Reporting (SSR) capabilities a year ago, which helps business leaders to visualize their data, and to layer charts, and to customize their reports.

What role do Chief Financial Officers (CFOs) and Chief Information Officers (CIOs) play in ensuring the quality of financial data – what makes a digital-savvy CFO?

The role of the CIO has evolved to that of a strategic partner to the business, and managing costs is a key part of that role. Yet enterprises often lack oversight into the minutiae of IT spend, how it correlates to the services delivered, or how to derive value from IT services. 

I think a digitally savvy CFO is one that is armed with daily digital insights into how CIOs are managing their spend and can derive ways to appropriately charge back within the organization for IT services.

Ensuring IT investments are defendable and fully aligned to business goals has never been more crucial. While technology planning is critical, it’s compounded with the explosive demand for cloud computing and lean-agile innovative practices brought about by the pandemic. CFOs and CIOs are under pressure to fully leverage the value of the cloud and modern development practices and yet minimise costs and differentiate their businesses.

Why is technology investment often misaligned to overall business strategy?

Research by Gartner revealed that when it comes to preparing IT budgets, CIOs and IT leaders often work in isolation. This inevitably leads to misalignment between technology investment strategy and overall business strategy and objectives.

This occurs because IT budgets typically focus on individual general ledger line items, rather than on the overall enterprise goals. This budget is viewed as “fixed” and lacking flexibility to fund the right things to enable the success of the enterprise and investment decisions are too often driven by whether the spend is operating expenditure or capital expenditure. 

For leaders to more effectively support their Board’s business strategy, CIOs and IT leaders should use cross discipline budget processes to ensure money being spent on tech supports all long-term goals.

How can CFOs make use of best practise frameworks to guarantee that investments made result in increased productivity?

We recommend the Technology Business Management (TBM) framework.  The TBM community comprises technology and finance leaders from more than 11,000 organizations. This non-profit industry body pools knowledge and experience to define best practices tools, processes, data, human resources, co-dependencies, etc to optimize how technology is managed in an organization. The TBM Council releases frameworks across numerous industry verticals that include related industry nuance.

Many organizations start (and end) analysis of IT values with spend metrics. An upfront view of IT actuals to budget is helpful, however, it is limiting since it leads to further analysis rather than an endpoint. 

Some enterprises blend operational and financial data for more insightful calculated metrics and get IT Finance to take extracts from the corporate financials, layering in the IT context from a CMDB, project lists, IT asset database, service desk systems.

TBM combines these features and starts with a strong financial foundation and then works within a framework to ensure complete business alignment for all technology investments. By starting with the basic financial baseline and working toward the ability to communicate and chargeback, companies can also include any of the specialized pillars or specialties they need.

About Apptio

Apptio was founded in 2007 to provide cloud-based business solutions to customers. Since our inception, we’ve gone on to become a one-stop shop for businesses looking to optimize their IT budgeting, forecasting, and financial analyses. After going public in 2016, Apptio was acquired by Vista Equity Partners in January 2019. This partnership has allowed Apptio to buy out competitor Cloudability, surpass 1,000 employees, and open an Asia headquarters in Singapore. Read more about the partnership.