Tangoe State of IT Spending: A Look Back and Ahead

This syndicated post originally appeared at Network Computing.

Tangoe’s annual IT Trends and Savings Recommendation report recaps IT spending in 2023 and provides savings tips for 2024.

Tangoe, a company managing and optimizing $34B in IT spending, just released its annual IT Trends and Savings Recommendations report. This report is a must-read for technology leaders looking for ways to make financial room for new investments in Generative AI or simply squeeze more out of their IT budgets. Here are some of the key sources of savings and why I agree with them.

With 60 technology cost management consultants, the company gleans its money-saving tips from its “hundreds of digital transformation and cost-reduction projects with clients across every industry.” The report contains their insights on how to make the best purchasing decisions, save money, and prepare for what’s coming next.

Focus on financial sustainability

In 2024, Tangoe says executives must ensure financial sustainability from investments in AI, cloud, mobile, and telecom technologies. Being a former IT leader, I strongly agree with that thesis. Financial certainty helps make the best and most educated decisions moving forward. To underscore that, the company shared a few key points to keep in mind next year:

  • Tech costs will continue to be harder to control as innovation expands and fractures.
  • Cloud invoices are spinning out of control as AI investments and cloud expenditures increase.
  • Technical debt could result from urgent demands for innovation

When businesses move to the cloud, the financial structure moves from something highly orderly and predictable to a pay-per-use model with high peaks and low valleys. Even if the company is likely to save money, the fear of uncertainty keeps companies from shifting to the cloud, further perpetuating technical debt. A clearer understanding of economic impact gives customers the confidence to shift to the cloud.

Here are my impressions of the rest of the report:

Cloud spending and savings

According to the report, the cloud remains a top source of savings, with studies showing that 30% of cloud assets are wasted. Tangoe says its clients saved up to 40% in 2023 using cloud expense management solutions.

The large amount of cloud assets being wasted supports my point above regarding the need for clarity around the economics of moving to the cloud. Pay-per-use makes cloud expenses harder to track. Adding to that is the ease of provisioning for IT pros or even line-of-business people to provision new services or turn features on. What might start as a few pennies a day can grow quickly if left unmonitored.

Tangoe notes intense competition amid cloud service providers. As a result, Tangoe urges companies to “shop their options and cut costs by switching or diversifying providers.” There are also lucrative ways to optimize existing infrastructure with technologies that can generate cost-cutting recommendations within 24-48 hours across multiple providers.

It’s important to constantly negotiate with the cloud providers as they are continually finding ways to decrease their costs. AWS is typically good about proactively passing savings on to their customers, but the same can’t be said for Azure and Google Cloud.

AI and Generative AI investments increase cloud spending and require governance and cost control

Tangoe says that investments in AI and GenAI have resulted in additional cloud spending problems and higher shadow IT costs. With 50% of companies investing in GenAI and heavily relying on cloud storage and computing, Tangoe notes that this will only worsen in the next 12 – 18 months.

The investment in GenAI correlates with my own research, although most IT leaders I’ve talked to are uncertain of the costs. What is certain is that organizations will need to put more data in more places, which, as the Tangoe findings indicated, will drive up both storage and compute costs. In theory, the ROI of GenAI will trump any additional costs, but that won’t be on day one.

Choice overload and “cloud-flation”

Tangoe points out that there are hundreds of thousands of cloud infrastructure SKUs associated with an hour or less of compute capacity services. They write that pricing and discounting can be similarly overwhelming due to a lack of standardization across providers. As a result, they recommend AI-powered cloud optimization tools for a simplified path to cost savings.

In addition, cloud prices, especially for SaaS and IaaS, have risen quickly in the past year, with:

  • SAP rising 5%
  • Salesforce up 9%
  • Google Workspace up almost 20%
  • Microsoft Cloud up 9%

Tangoe adds that IBM will increase cloud infrastructure costs by up to 26% next year.

Mobile & IoT spending and savings

There’s no argument that mobile devices are a requirement in the remote work environment. Tangoe notes that they see a 30% savings potential amid common overprovisioning.

Companies no longer hand out mobile phones like they used to. And some companies are taking back mobile and softphone licenses from employees to avoid overspending. Mobile repossessions can help cut costs and improve IT productivity and security.

The mobile landscape is on the verge of becoming more complicated. Business mobility has typically been done through collaboration applications, but now there are services like Webex Go and Verizon Mobile for Microsoft Teams, which integrate business calling directly into the mobile operator’s network without needing an application. This has many benefits but does work best if the company moves back to a corporate-liable model.

IoT innovation spending rises as barriers fall

IoT innovation spending is rising, driven by 5G and managed services. Tangoe says that “5G provides affordable connectivity for IoT devices in comparison to MPLS and other fixed-line services, and the adoption of device management services makes IoT innovation sustainable with less impact on the IT department.” They say that now is a good time to increase investments.

While 5G hype has outpaced deployments, 2024 should be a big year for wireless technology. A recent ZK Research study found that 92% of organizations plan to adopt 5G. It’s important to note that most businesses will use it to complement Wi-Fi and not replace it, creating an additional management burden for IT pros.

Telecom spending and savings

The Tangoe study found that satellite ISPs, like Starlink, are gaining popularity among its customers. Starlink (owned by SpaceX) grew faster than any vendor Tangoe has seen in 12 months. Tangoe says satellite internet services will be the top telecom trend to watch as other players (including Amazon) enter the market next year.

The ongoing talent crunch and logistical challenges plaguing IT will continue to hinder telecom modernization initiatives. Even though the benefits of SD-WAN and SASE are clear, the logistics can inhibit that transformation.

Telecom pricing trends

Direct cloud connections offer significant telecom savings when you take the time to shop around. Default offers from large carriers aren’t cost competitive, warns Tangoe, which urges companies to use formal RFP processes and negotiators to cut prices in half.

The overarching thought from Tangoe is that companies must actively manage their cloud, mobile, and telecom expenses to stretch IT budgets in 2024.

My takeaways

Tangoe did a good job of looking at the current situation and peering into the future. We are at something of a watershed moment. The world is normalizing after nearly four years of pandemic disruption. However, it will still be critical to manage expenses in 2024, with considerable opportunities coming in cloud, mobile, and telecom expense optimization.

Author: Zeus Kerravala

Zeus Kerravala is the founder and principal analyst with ZK Research. Kerravala provides a mix of tactical advice to help his clients in the current business climate and long term strategic advice.