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Eight disruptive forces affecting IT cost management

How IT managers can mitigate impact of sudden cost increases

Eight disruptive forces affecting IT cost management

Information technology asset cost optimization is a growing concern for IT asset management (ITAM) and IT procurement professionals, says Gartner, in a report that outlines eight disruptive forces that could lead to sudden cost increases if not managed proactively.

Below are the disruptive forces that could have a significant impact on ITAM and IT procurement professionals, together with advice on how to contain or mitigate them from Alexa Bona, vice president and distinguished analyst at Gartner:

  • The internet of things: This is the network of physical objects that contain technology to sense and communicate or interact with their internal state or the external environment. As things such as consumer items, vending machines, automobiles, city infrastructure, and enterprise assets become connected to the internet, new experiences, operating efficiencies, and business models can be created. However, as more and more of these very numerous devices become connected to traditional software, licensing models with device-based fees or indirect fees will result in a licensing cost explosion, so ITAM and IT procurement professionals should take proactive steps to avoid them.
  • Maintenance fees: Software vendors are increasingly dependent on and protective of their maintenance fees, which often generate profits of 85% or more and account for almost half the revenue of some. These fees are rising steadily, and are more difficult for ITAM and IT procurement managers to reduce, even when the software is not in use. To deal with these changes, ITAM and procurement professionals must improve their demand management skills, avoid purchasing licenses that they do not require, and negotiate price protection for maintenance payments. They must also understand the impact of emerging third-party maintenance options and recent European Union rulings on the resale of licenses.
  • Software audits: ITAM professionals need to be audit-ready. A Gartner survey conducted in the fourth quarter of 2012 found that 63% of the respondents had been audited at least once in the prior 12 months. Inquiries from Gartner clients also indicate that audits are growing more intense, are being demanded by both Tier 2 and Tier 1 vendors, and are harder to defend against.
  • Cloud computing: The worldwide market for public cloud services is on course to reach $131 billion in 2013, and Gartner predicts that it will exceed $180 billion by 2015. ITAM professionals must be able to provide accurate cost models that compare traditional services with industrialized and cloud services, and be able to explain the comparative benefits and risks. IT procurement professionals need to manage the bypass risk (when IT procurement gets bypassed and the business buys directly), communicate the hidden costs and increased risks of cloud models, develop more robust demand and risk management methods, and negotiate beneficial terms in today's immature cloud contracts.
  • Mobile and app stores: The lack of dominance of one form factor, platform, or operating system will affect negotiations with previously dominant vendors. In addition to managing a new dynamic with existing providers, IT procurement executives must be ready to deal with new vendors, such as Apple and Google, that because of their consumer orientation behave very differently from traditional providers. Software vendors are changing their licensing programs to charge for new types of mobile device, so IT asset managers need a firm grasp of compliance-tracking, the related costs of employee-owned devices, and the various consumer apps being brought into their organizations. For some, enterprise app stores may help optimize mobile asset costs and management.
  • Virtualization: IT procurement managers are still finding it difficult to reduce software costs in virtualized environments, and IT asset managers are struggling to manage compliance with complex and changing virtualization contract clauses. This is particularly true for desktop virtualization, which is often one of the mechanisms used to facilitate bring your own device strategies.
  • Big data: As more and more information is collected and analyzed to improve competitive advantage, we will see requirements for even larger databases and more storage. ITAM and procurement professionals will be challenged to optimize costs because of the core-based licensing metrics by which much of this software is licensed. IT procurement professionals may also have to start sourcing data and defining and negotiating new business service-level metrics for information services in relation to integrity and quality.
  • BYOD schemes: Mobile devices—both corporate-owned and personally owned but used in the workplace under BYOD schemes—are adding new security and environmental risks and costs to the IT asset disposition equation.

 

John Ginovsky

John Ginovsky is a contributing editor of Banking Exchange and editor of the publication’s Tech Exchange e-newsletter. For more than two decades he’s written about the commercial banking industry, specializing in its technological side and how it relates to the actual business of banking. In addition to his weekly blogs—"Making Sense of It All"—he contributes fresh, original stories to each Tech Exchange issue based on personal interviews or exclusive contributed pieces. He previously was senior editor for Community Banker magazine (which merged into ABA Banking Journal) and for ABA Banking Journal and was managing editor and staff reporter for ABA’s Bankers News. Email him at jginovsky@sbpub.com.

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