IT spending: boosting business performance

The FinOps Foundation defines FinOps as a promising cloud financial management discipline and cultural practice. It enables organisations to unlock maximum business value by fostering collaboration among engineering, finance, and business teams in making data-driven spending decisions.

The absence of proper FinOps can lead to unwise spending decisions and the accumulation of technical debt. Technical debt refers to the cost of additional rework caused by choosing an easy solution now instead of using a better approach that would take longer.

As identified by IDC, this debt can encompass hidden IT costs, increased operational risks, compromised security, hindered innovation, and challenges adapting to change, underscoring the need for its careful management to support business strategies. 

"As companies become more digital, they need to actively measure and manage their tech debt leverage in the same way that they pay attention to their financial debt leverage, and they need to ensure that they are making regular payments against that debt to keep from becoming too highly leveraged in their tech stack," said Daniel Saroff, group vice president, Consulting and Research at IDC.

Tarun Kumar Kalra, vice president and head of Sales—APAC, Apptio, an IBM Company, shares his insights on tracking an organisation's IT spending performance, aligning IT investments with business goals, and critical tips for making the most of FinOps to support business growth.

Tracking IT spending performance

Kalra observed that organisations are increasingly focused on tracking their IT spending performance, citing their report, "Executive Insights on Tech Investment Decisions," which reveals how tech leaders currently prioritise data-driven decision-making.

The report shows that over half (57%) of tech leaders use organisation-wide data to guide their investments.

"Given that 85% of tech budgets are constrained, gaining insight into the return on IT spending has become crucial, especially in today's increasingly complex technological landscape," Kalra said.

Disconnect

With most tech leaders prioritising data-driven decision-making, does it follow the assumption that organisations measure the success of their IT investments against expected outcomes? Kalra said there is a disconnect, citing a Harvard Business Review study.

"Over half of respondents do not consistently measure the business value of technology investments, even though 92% consider this information crucial for budget decisions – revealing a significant disconnect," he explained.

Kalra urges business leaders to improve data transparency within their organisations and maximise it to explain the role of aligning technology investments with business goals.

"Utilising tools such as IT benchmarking – comparing IT spending and performance with industry standards and peers – could enable organisations to pinpoint areas for improvement and validate their decisions," he said.

IT investments and business goals

Aligning IT investments with business goals is a crucial strategy for organisations. It ensures that every IT investment aligns with the overarching business objectives, thereby maximising its value.

"Organisations should establish a regular review cadence for their IT investments to ensure alignment with business goals. This could involve monthly leadership reviews to monitor IT performance and KPIs, quarterly business reviews with unit partners to assess IT service value, and an annual planning process to set future objectives." Tarun Kumar Kalra

The Apptio executive acknowledges the high costs of frequent reviews with external consultants and suggests organisations deploy effective cost-saving strategies. These include solutions that evaluate waterfall and agile investments and real-time insights to optimise cloud spending.

"This disciplined yet adaptable approach helps ensure IT investments deliver maximum value and stay aligned with strategic goals," he said.

Tools or frameworks

Kalra believes that the technology business management (TBM) framework is essential for improving visibility into IT spending.

"It helps technology leaders identify redundancy and duplication by tracking and benchmarking fiscal performance, enabling more effective use of existing resources," he said.

He also recommends that organisations adopt a FinOps framework to refine IT spending visibility further.

"This approach, which centres on the three phases of FinOps—Inform, Optimise, and Operate—allows leaders to continuously assess IT spending, recommend improvements, and implement processes for better financial management," Kalra explained, adding that the two frameworks can help organisations gain clarity and control over their IT spending.

Communicating and collaborating

Kalra posits that clear and informed financial decisions entail equal visibility into IT spending.

"Regarding IT spending, CFOs, CEOs, and other business-focused leaders are often the key stakeholders. This is where the FinOps framework could offer a comprehensive, non-hierarchical approach that fosters collaboration between finance and IT teams across all levels and functions," he said.

Organisations should also establish feedback mechanisms to collect insights on IT performance, such as regular reviews to discuss performance and gather stakeholder feedback.

Kalra also finds value in leveraging appropriate tools, like dashboards, to visualise real-time metrics. Such tools allow organisations to input immediately, provide performance trend insights, and make recommendations.

"Additionally, implementing an integrated feedback channel within one's platform enables direct stakeholder input, ensuring a comprehensive understanding of their perspectives and needs," he said.

Improving transparency

Kalra said that organisations should have an open and accountable culture if they want to improve transparency into costs and business value.

"Business leaders should use technology to benefit the as a whole, rather than operating in silos. Meanwhile, teams should be encouraged to understand and take responsibility for the costs associated with their actions. Organisations can better control costs and proactively address issues by promoting awareness among engineers, developers, and product owners.