Controlling enterprise technology, digitising costs in developing world

The nexus between capital efficiency and the effectiveness of digitisation and related enterprise technology investments are major concern for many a business executive and boards today.

In today’s marketplace technology is not just a business growth asset, but an essential survival tool. Strategists concur that investment in the latest technologies has become a crucial competitive edge.

Nations have not been left behind, with Kenya launching an ambitious Digital Master Plan 2022-2032, which forecasts rapid digitalisation in the private and public sectors.

The C-Suite is increasingly faced with questions on the cost of such investments. Are there any scientific models that can support decision-making when it comes to technology investments? The escalating costs associated with enterprise technology and digitalisation and the imperative for practical strategies for businesses to effectively manage these challenges have become germane.

As organisations invest huge financial resources in digital transformation, understanding the drivers of increased technology spending and implementing targeted cost-control measures have become critical for sustainable growth and competitiveness.

Controlling the rising costs of enterprise technology and digitalisation requires strategic and proactive approaches. In developing economies, these challenges are worsened by the pressures occasioned by market uncertainties and limited capital.

One of the tools that businesses can tap is technology investment prioritisation. Most enterprises still find themselves succumbing to decisions pushed by vendor-driven aggression. This will result in technology investments that are misaligned with the overall strategies of the enterprise and what it needs.

Executives must support the enterprise in prioritising investments that directly contribute to key business objectives and provide a clear return on investment.

It does not help that licensing for the entire enterprise technology stack can be complex. In a typical enterprise technology deployment, upwards of 60 percent of the costs are due to licensing, software and infrastructure support.

Today, enterprise technology licensing and the need for annual software support subscriptions constitute some uncomfortable conversations between finance and technology executives. As the era of the perpetual licensing model winds down, many enterprises are struggling with subscription model licence negotiations.

Enterprises should explore opportunities for renegotiated subscription contracts, factoring technology product utilisation, growth prospects, business fit and key strategic priorities.

The transition phase presents opportunities to manage costs and secure better contract terms.

Businesses must also evaluate the Technology and Digitalization plans in detail. Critical factors such as acquisition costs, implementation timelines, technical support, commissioning and decommissioning costs must be considered at the planning phase. Such components are usually overlooked and will certainly constitute costs which will impact how the business implements technology.

In many cases, an enterprise technology project will also involve multiple integrations with other internal systems and to some extent, provide integration touchpoints with external stakeholders’ systems. Some technology vendors bill for integration licenses in addition to the unavoidable technical consulting man-hours.

All enterprises today use technology they do not own rights to. Therefore, a relationship must exist between the patent holder and the enterprise. A well-managed vendor relationship can extend multiple advantages to the business. Opportunities to utilize test instances and licenses, access top grade consulting hours, negotiate longer-term, cost-effective contracts and technology transfer and training can be maximised at inception and deployment.

Often, senior management struggle to downsize project values to fit fixed budgets, in cases where vendors introduce inflexible technology purchase options. In this era of everything as a service (XaaS), virtually every technology solution is deployable on a hosted or cloud model. In instances where industry regulations permit, this model has provided organisations with secure, flexible deployment options and scalable infrastructure that allows budgets to move towards flexible, open models.

There are numerous opportunities for technology pooling on infrastructure and even application hosting on tenancy models. These trends, if managed well, have enabled many enterprises to piggyback on shared infrastructure to deliver value in tight-budget situations. Numerous possibilities also exist for joint training and knowledge transfer in such arrangements.

These strategies, however, should be subjected to a comprehensive risk assessment that will allow for insights to any potential pitfalls. Not every enterprise will require best of breed, top-dollar technology investment. A look at the Gartner magic quadrant in every technology segment will reveal multiple, leading technology products, their capabilities and capacities. This widely used tool can be useful in making data-driven decisions at the point of a technology refresh, overhaul or migration.

Models do exist that can support such decisions. There is a need, however, for more industry data and peer-to-peer information sharing to help professionals navigate these complexities.

Malitt is a technology and investments expert.