Four Key IT Spend Trends to Follow in 2023
IT spend predictions you need to know to deal with unpredictability and plan ahead.
The economic climate has been shifting over the past several months, and tech executives are being pressured to optimize costs and even make budget cuts. But IT spend is complex, and CIOs often need to align with procurement and finance teams to make the right decisions. In this article, Aashish Chandarana shares his top technology predictions for IT to help CIOs prepare for the unpredictable road ahead.
Digital work continues to be a top priority for companies in this new world of working in the office or in a hybrid or remote office schedule – and tools continue to be necessary to keep workers engaged, successful and efficient.
However, in the past two years, most companies have over-invested in SaaS apps: Gartner estimates that as much as 55% of SaaS spend is wasted or heavily underutilized, and this is likely being exacerbated by the shift in working patterns from remote to hybrid, and in an increasingly higher number of cases a full return to the office.
Companies are now taking action: According to my company Productiv’s data, the average SaaS contract size in 2022 ($2.23M) was 13% smaller than the average contract prior to 2022 ($2.57M). But reducing spending can be easier said than done. One of the biggest mistakes technology leaders could make is to cut things that employees need to complete their job successfully and efficiently.
Below are my predictions on what CIOs should focus on to make sure their workforces have the tools they need to do their jobs while their companies optimize spend and ROI on purchases in a tough climate.
See More: APIs: A Bottleneck for SaaS Backup
Reducing IT Spend Waste Has To Become a Team Sport
With the economic uncertainty, we are facing in 2023. While research indicates that most companies are likely to increase IT spend, there’s clearly a desire for caution when it comes to operating budgets, and IT leaders need to spend much more wisely—especially when it comes to the segment growing the most: SaaS.
CFOs, CIOs, CTOs, and business leaders need to work in collaboration to make better decisions when it comes to optimizing software spend, eliminating waste and redundancy, and driving value during renewals across their SaaS investments.
Making the right decisions will be critical for balancing technology spend with business goals, and having a data-driven approach will be key – the need to balance employee productivity while unlocking ROI in a measurable way needs to be the new norm.
Data Will Help IT, Finance and Procurement Teams Align on Optimizing Existing Software
Procurement, finance, and IT teams in 2023 will be under tremendous pressure to optimize software spend, eliminate waste and redundancy, and drive value during renewals. This requires accurate and granular data on how employees and teams use tools, like SaaS apps, combined with insights on contracts and expenses.
By using deep data and insights to make decisions, organizations can better negotiate license renewals and eliminate the cost of redundant tools.
When It Comes to SaaS Spend, Companies Will Negotiate Bundle vs. Best-in-Class
This will be the time when you find out which SaaS companies are vendors and which are partners.
When IT leaders are looking at their portfolios and rationalizing spending, large SaaS companies will look to maintain their position by bundling more aggressively and claiming products are free. Not all of this is true.
The notion of best in class vs. a suite of apps will become a debate again as people start to really look at the data of what is being used and, more importantly, how.
Often these “free” apps may look like they offer like-for-like functionality, but the reality is that you need to consider the business impact of the choice you are making, not just make a cost-based decision. Can you really afford to replace tools that have very high adoption rates and usage and hope that the perceived lower-cost option will deliver the same results?
See More: Features-as-a-Service Is Making a Comeback for Application Development
SaaS Market Consolidation Will Occur as Acquisitions Ramp Up and Product Portfolios Increase
We may see further consolidation in the industry as some of the larger players look to strengthen their portfolios – and we could see a wave of mergers and acquisitions in 2023.
Large enterprises are starting to double down on their core businesses and drive focus, however, I do expect companies like Amazon, Apple, Google, Microsoft, Oracle and Salesforce to be opportunistic and look to acquire to continue to drive growth where it makes sense for them.
In other cases, either through acquisitions or by building, we will see greater overlap in the products available – for example, Zoom, who are now moving into the broader employee application suite with Mail, Calendar & Chat. Slack will be launching Canvas soon, which also starts to broaden its product base.
In 2023, companies need to be able to ensure that their SaaS apps are optimized for cost-effectiveness and usability. Aligning finance, IT and procurement around the same goals is key to success, but balancing employee choice and productivity is also now key to understanding the impact of the software you buy.
What are your key focus areas as you map out IT spend for the year ahead? Share with us on Facebook, Twitter, and LinkedIn. We’d love to know!
Image Source: Shutterstock
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