Influenced by the crisis of 2008-2010, CIOs have definitely integrated the imperative of cost control. Drastic savings opportunities are no longer available as they were 10 years ago. Two new challenges are taking over: managing IS technical debt and monitoring new uses, particularly the cloud and the on-demand billing that must follow.
Technical debt is the gap between existing IT and the state of the art or market standards. However, new norms or new standards are always appearing on all dimensions of the Information System: applications, software, hardware or organizational. The state of the art is therefore to be considered in a global ecosystem. Structurally, large companies are always behind schedule, and therefore mechanically generate technical debt.
This technical debt can be managed in several ways, with strategies to be established by the IT department in line with business needs. In all cases, this strategy takes the form of a trade-off, as in the case of loan repayment, between operating costs and investment costs.
Arbitrate between operating and investment costs.
Schematically, there are only two ways to repay a debt: either by maturity or in fine. In the first case, this implies planning upstream to invest regularly to renovate a part of the infrastructure or an application environment. In the second case, one does nothing to repay, one simply accumulates debt until the next due date. Unfortunately, in the case of IS, the less you invest, the more technical and functional obsolescence takes hold. And the bigger the jump to pay off the debt becomes. It is no longer a simple upgrade, or version change, but a complete redesign or transformation.
This discrepancy between the two technical debt repayment mechanisms has been amplified by the digital transformation that is accelerating every year, notably with the introduction of new technologies, new development modes and the agile organization. The technical debt of large companies is increasingly heavy and represents a significant inertia for the achievement of its objectives. As a result, technical obsolescence is occurring more and more rapidly.
Faced with this phenomenon, new players are arriving on the market, without any existing infrastructure or fleet to renew. They have no debt to manage. Without this technical debt, these young companies are much more agile and dynamic and have the ability to break the codes and capture market share very quickly. Conversely, large companies, who also want to be on board with this transformation, are forced to carry their technical debt at arm’s length. And the management of this debt is holding them back.
Aiming for a Capex vs. Opex balance
The trade-off for this technical debt remains constant: how to control operating costs in such a way as to always preserve its investment capacity? A 50/50 ratio – between operations and investment – is an ideal target. However, the majority of IT spending by large companies is now more about operating costs than capital expenditure.
With lower investments, technical obsolescence and technical debt together increase, as does the share of the operating budget. These companies are always caught in the middle: how can they invest enough to control their operating costs? Preserving high investment margins is a virtuous way to maintain the capacity to invest and transform.
Monitor new IS uses
Any player can now have instant access to IT resources and unrestricted computing power, with usage-based billing. The company has moved from a Capex world where it owned its resources and managed usage freely… to an Opex world where billing is linked to usage time. If not vigilant, Opex – with its attendant on-demand billing – can gradually become a burden.
The cloud is competitive when you know how to control its use. But it is much more expensive than an own investment when it is used 24 hours a day or when the solutions no longer coincide with the needs. Mastering its use is therefore the key to fully benefit from the advantages of the cloud and on-demand billing, such as AWS or Azure. Clients need to integrate these new practices and have the right tools and processes in place to drive this mode of operation.
Because it’s a fact: everyone wants the ease of the cloud. We must be vigilant and take into account the constraints of control and management of these uses. In short: avoid the pitfall of the “all-you-can-eat buffet” by opening to everyone, 24 hours a day.
Adjusting investment strategies
Lucenys’ role is to assist its clients in adjusting their investment strategy, by confronting the opportunity costs. Our customers are asking themselves trade-off questions: should we delay the renewal of our infrastructure to gain cash flow? Why not in some cases, but provided that the cash flow is well invested. Deferring an investment can be relevant if the cash flow generated is invested in other projects that will truly add value.
We must always keep in mind that the role of IT production is to support the business and the professions. The latter are often attracted by this digital transformation and ask CIOs to accompany them. But the CIO also has to manage everything that exists. IT legacy management makes it less agile than the business would like. And this gap can generate misunderstandings between the CIO and the business. The major challenge for CIOs is this dual management on a daily basis. The IT department is in a constant tug-of-war between accelerating towards digital transformation and managing the existing situation.
What is Lucernys’ role in addressing these issues?
Lucernys’ expertise covers the entire IT infrastructure sphere: systems, servers, cloud, network, telephony, workplace, desktop, mobility, etc. Lucernys provides a 360° approach to its customers by scanning all dimensions of IT: financial, technical, organizational, functional. By combining all these dimensions, we help them define the most relevant technical and economic optimization paths. This allows us to enter a virtuous circle of continuous improvement, with constant work to maintain a balanced ratio.
With a double technical and financial expertise, our knowledge of the market and IT issues of our customers allows us to establish a bridge between the technical opportunities brought by the base and the necessary step back to present the major issues to the management. Our value also lies in our ability to speak to all functions and layers of the organization and to synthesize all of the company’s IT initiatives.
Our goal? Reconcile the financial and technical worlds of the organization. IT’EM’s tools allow to explore and maximize the use of subscription offers, while ensuring economic efficiency. They also make it possible to verify that the services subscribed to truly meet functional needs that can be circumscribed in time. Finally, isn’t the cloud meant to be turned off when not in use?