IT spend management is the collection, maintenance, and analysis of company-wide spend related to the technology in use in an organization. The goal is to look for opportunities to reduce costs, increase efficiency, and better monitor and implement workflows. Spend management covers the entire lifecycle of an IT asset from the procurement process to end-of-life services (like recycling) and everything in between. So what are the key things you need to know about how IT spend management works?
Determine All Expenditure Sources
Expenditures occur in nearly every aspect of running a business and in the modern era, IT is one of the largest and most important. Sources of IT expenditure include areas such as network, mobility, hardware, cloud expenses, SaaS licenses, and collaboration solutions. All companies have different costs and spending depending on size and industry, so this analysis is unique to each business. The average spent on IT across all industries is about 8.2% of companies’ revenue.
Making these determinations can be a complex and challenging task. Search for automation opportunities, such as software solutions that provide a complete independent inventory of your assets and associated spend, to avoid reliance on spreadsheets or provider portals that are not always accurate. Getting a solid grasp of the overall spend from a macro perspective can expose savings that businesses may otherwise miss.
Create a Central Storage Area for All IT Spend Data
Every penny that gets spent company-wide should flow from a centrally managed point. Since IT spend in particular encompasses nearly every facet of a company’s operations, IT spend management is an ideal opportunity to create a centralized database from which to manage, record, and maintain the cost of all IT assets.
Verify and Clarify All IT Spend Information
Due to the gravity of decisions made by analyzing this information, the data must be completely accurate. Spend data should automatically be verified as accurate, cross-referencing it with inventory, invoices, and contracts. Understanding that your data is clean and tied to every phase of the IT lifecycle means that your spend projects are accurate and decisions based on the data (i.e. moving multiple devices to a new pooled plan based on cost and usage) are 100% data driven.
Standardization of data (i.e. normalizing various product names) is a crucial aspect of maintaining accurate records. Make sure all expenditures have the same process and data collection.
Organize IT Spend Data into Categories
IT spend falls across various types of expenditures and it’s important that organizations be able to isolate and examine spend by category. One of the benefits of vCom’s vManager software platform is the ability to segment IT spend by the six largest areas of spend: Network, Mobile, Cloud, SaaS, Hardware, and Collaboration. Develop subcategories to assist with the ease of analysis to keep things organized. For example, break inventory down by location, type of service, carrier, etc. As the item types are unique to each company, ensure they can be created on a case-by-case basis. Assets can and should be “tagged” to the correct cost center (like location or department) to ensure line item budget visibility.
Begin Analysis of IT Spend Data
Once you have the data collected, verified, corrected, and categorized, you’re ready to begin analysis. Analysis includes:
- Examining the data to show recurring patterns of expenditure and point out any anomalies that may occur.
- Using this information to calculate averages, margins, and the like.
A good analysis strategy involves using technology like artificial intelligence (AI) and machine learning (ML) to automate much of the analysis behind-the-scenes to identify spend patterns and implement changes and optimizations. Of course, the human element is required to interpret the information gleaned from the data and ensure that strategic decisions are made as a result.
Develop and Execute IT Spend Strategy
Now it’s time to develop and execute your IT spend management strategy. Depending on your needs and the scope of the changes involved in your new strategy, you can roll this activity into one go. Or you can implement your strategy incrementally with further examination, data collecting, and analysis done along the way to make sure your new strategy is effective, efficient, and inclusive. Feedback and complete buy-in from all involved parties are crucial to the success and efficacy of your IT spend management strategy.
Forecast and Plan Ahead
Next, you can begin to use the data to project possible trends and future needs. You may discover some upcoming bottlenecks that can be preemptively avoided by proactively identifying procurement needs and balancing spend accordingly. While human interaction is vital, having a software platform that encompasses AI- and ML-driven functionality is a great tool to automate and streamline the process.
Final Thoughts On IT Spend Management
Many companies typically begin to worry about IT spend management when it becomes problematic and complex, or when expenses have grown exponentially. However, it’s a far better strategy to implement a solid IT spend management strategy before it becomes an absolute necessity. It will provide ample time to develop and perfect the process, while still saving money along the way.
Using the information discussed above, you can begin to implement your company’s IT spend management strategy and become more efficient and pragmatic with your expenditures. If you’re interested in learning more, contact us at vCom Solutions. A knowledgeable team member can share how vCom Solutions can help coordinate, centralize, and manage your IT services more effectively.