Today we report the results from the Flexera 2020 State of Tech Spend Survey to identify the latest IT spending benchmarks and trends. This first annual report is based on responses from more than 300 enterprise CIOs and IT executives who are driving digital transformation. It enables enterprises across every industry to analyze technology spend trends and benchmark against peer organizations.
There are many key highlights especially relevant to organizations dealing with fast-paced hybrid IT environments. The 2020 Flexera State of Tech Spend Report uncovered what’s trending in large and medium enterprises, illuminating issues that should be on an IT professional’s radar.
Challenges in managing IT spend
We asked survey participants what challenges they face managing IT spend. The four most significant challenges reported by respondents are: too many manual processes, ensuring spend efficiency/avoiding waste, understanding the cost of delivered services and the difficulty getting data to optimize spend.
Get the full results from the Flexera 2020 State of Tech Spend Survey
Spend optimization frees up investments for digital transformation
The typical hybrid IT environment consists of both legacy systems and new technologies, which has led to an IT tangle that challenges IT teams with “running the business” while moving forward with new initiatives. In organizations today, it’s no surprise that the top three IT initiatives are digital transformation, cybersecurity and cloud—because they’re all closely aligned.
To achieve positive outcomes from digital transformation efforts, organizations will need to free up investments by reducing waste. Survey data indicated organizations are not mature in optimizing spend—especially in cloud and SaaS. And there is significant room for improvement when it comes to identifying shadow IT and wasted IT spend as well as optimizing public cloud and SaaS spend.
Spend optimization is especially critical for cloud
The shift to cloud continues, with cloud spend (SaaS, PaaS and IaaS) now representing 25 percent of IT spend, surpassing on-premises software spend (22 percent). The mix of software spend is also shifting, with a quarter of software investments now allocated to SaaS.
Knowing how IT spend is shifting over time can help an organization identify where to focus optimization efforts. Looking forward, nearly half (45 percent) of respondents will decrease investment in on-premises software, counterbalanced by more than 80 percent of respondents who expect to increase spend in cloud (IaaS/PaaS) and SaaS.
With this increase in cloud and SaaS spend, it’s important to put in place tools and processes that can assist with identifying shadow SaaS spend and rationalizing the portfolio to prevent or reduce overlapping and underutilized applications, or those that could create a security risk.
Only 21 percent of organizations reported they were very mature when it came to identifying shadow IT. With 26 percent of business units having control of decentralized IT spend, it’s easy to understand why complete visibility into shadow IT purchases can be complicated.
Rightsizing cloud environments will be an ongoing effort to reduce or avoid waste. Data in this area indicated there was much opportunity for improvement because only 18 percent of companies reported they were very mature when it comes to identifying wasted IT spend.
Optimization is critical for cloud migration
Increased cloud spend is driven by ongoing cloud migration. Thirty-two percent of workloads are already in the cloud (SaaS, IaaS or PaaS), increasing to 43 percent in the next year. Shifting workloads to the cloud will lead to another 11 percent of workloads being cloud-based by the end of 2020.
To achieve these cloud migration goals, it will be essential to understand the applications and components that comprise the IT business service. Knowing the costs involved in delivering the service will be an important part of the decision process. Yet 68 percent of respondents indicated it was very much/somewhat of a challenge understanding the cost of on-premises vs cloud.
As cloud grows, on-premises remains important
While organizations are shifting workloads to the cloud, they still have high levels of spend with traditional on-premises vendors. The most heavily used technology vendors are Microsoft, VMware and SAP, followed by ServiceNow, with AWS and Oracle tied at number 5. The vendors that offer the broadest set of solutions, from mobile to data center, have the largest market penetration. When ranking vendors by how much respondents spend with them, 43 percent said their largest vendor is Microsoft, while 13 percent picked SAP and 10 percent AWS.
65 percent of respondents expect to increase their use of AWS in the next year. With IaaS and PaaS spend increasing, more respondents will be increasing with AWS and Microsoft than any other vendor.
Microsoft is the on-premises vendor furthest along in garnering adoption of their on-premises software, SaaS (39 percent) and cloud (25 percent) solutions.
Flexera drives spend optimization for digital transformation
Flexera enables visibility into the software data needed for the digital transformation journey, from understanding current on-premises costs and software license entitlement position to handling cost-to-cloud and ongoing optimization of IaaS, PaaS and SaaS services. Flexera helps customers optimize both on-premises and cloud spend as they navigate the shifting technology landscape, regardless of the vendors they choose. Get the full results from the Flexera 2020 State of Tech Spend Survey or reach out to a Flexera expert to learn more about this data and how we can support your efforts.