Enterprise modernization has been on the rise for decades, leading to a surge in IT spend as more businesses rely on sophisticated software and cloud-based solutions to manage operations.
In parallel with this trend, organizations are also digitizing the way they and their employees spend money. With software and other IT service and product providers, support for B2B payments digitization has emerged in the form of a seamless, nearly invisible experience for the business customer. Reducing friction in the way companies pay for IT has become a vital value proposition.
Amid this shift, however, a new challenge has arisen. More firms are taking a “set it and forget it” approach to IT purchases, particularly when it comes to recurring and subscription services that require bank account or card details for automatic payments. It’s created gaps in finance leaders’ ability to control and manage IT spend, but according to Zylo Co-founder and CEO Eric Christopher, that’s far from the only pain point for both chief financial officers (CFOs) and chief information officers (CIOs) today.
Speaking with PYMNTS in an interview, Christopher discussed the factors driving a more complex IT spend ecosystem that can create new headaches for organizations looking to optimize their budgets in a volatile market.
While IT spend has seen a continual climb over the years, 2020 delivered what Christopher likened to a decade of progress on corporate digitization efforts. During a period of cost-cutting amid the height of the pandemic, organizations weren’t shy about investing in IT.
“The floodgates were open,” he said, adding that businesses adopted the mindset of, “Let’s buy anything that makes things easier for employees to do their jobs better.”
Services like Zoom and DocuSign that enable remote workers to continue productive operations became paramount. While a liberal approach to IT purchases supported a massively disruptive period for professionals, it also accelerated another trend in corporate IT procurement: the distribution of spend.
Exacerbated by the rise of B2B FinTechs like Brex, which make it easier than ever for businesses to generate secure, single-use cards for employees to make authorized purchases, the IT spend landscape expanded in a way that made it increasingly difficult for managers and finance leaders to consolidate visibility of these purchases.
“In a company with 1,000 or 5,000 employees, you’ve got a high percentage of employees able to [pay for subscriptions] with corporate cards,” he said. “It’s nearly impossible to have visibility or any central financial authority.”
Beyond Spend Control
For the budget-conscious enterprise, having insight into how much is being spend is crucial. But it’s not the only pain point of IT spend management. Increasingly, noted Christopher, it’s becoming more difficult to categorize that spend and retain control over whether that spend is justified.
“Generally, it’s about half of software spend that is misidentified and misclassified,” he said.
There is also a lack of visibility into which service tiers are actually necessary for firms that do decide a product is essential.
Making classification even more difficult is the fact that there are a growing number of platforms that not only cost money to use, but can also generate revenue for business users. Everything from eCommerce portals or FinTech tools are embracing the X-as-a-Service opportunity to embed features and functionality that can actually make money for customers. But when a single solution is both a cost center and a revenue generator, understanding the true cost of a solution — and whether that spend is justified — can present a muddled picture.
Breaking Down The CIO-CFO Barrier
With the emergence of service providers like Zylo, consolidating IT spend and actually understanding where the money is going — and why — becomes a more attainable goal. But leaders within the organization still have challenges ahead as IT spend continues to grow.
The silos that have historically separated the IT department from finance teams must come down in order to develop an effective IT procurement strategy, Christopher said, noting that this can place CIOs and CFOs in difficult situations.
“The CIO has traditionally managed the IT budget, so there was an idea that you protect the budget, so you have it for next year,” he said. “Now, they’re being asked by the CFO to go outside of IT into other budget areas, and now there is an awkward dynamic because the CFO is asking IT to control costs, but they can’t go into someone else’s budget.”
Embracing technology that can consolidate spend across departments and help both CIO and CFO leaders gain insight into which IT spend areas are most valuable and which might be ready for the chopping block is essential.