How to fund AI initiatives with software optimisation
With AI projects adding another strain on IT budgets, could the key to funding them be found is cost savings elsewhere?
Published on 16th August 2024
The first half of 2024 has proven to be a challenging year, with economic uncertainty and continued pressure to do more with less. As budgeting season starts to gear up for 2025, many organizations are struggling with how to fund innovation and drive growth in the face of tight budgets.
After 12 to 18 months of cutting costs and a laser focus on profitability, organizations have to start making bets again. After all, you can’t grow a business solely through cost-cutting.
But how, exactly, are businesses expected to fund these AI initiatives? At most organizations, new investments continue to be faced with a high level of scrutiny. Plus, there’s simply not a lot of wiggle room in most tech budgets.
Sure, we’re seeing some optimism and an uplift in budgets. Gartner analysts forecast IT spend to grow 8% year over year, with software growing at 14%. But at the same time, software prices are ballooning—often outpacing inflation. Some recent examples we’ve seen have been a 9% average increase with Salesforce renewals and a 20% increase with Google Workspace. That’s just to name a couple.
Midway through 2024, organizations continue to face flat budgets and rising software prices. Yet, there’s a big desire (and arguably, a need) to drive innovation, especially in the AI space. How can CIOs make this happen? Two words: software optimization.
The Opportunity Lurking In Your Software Estate
There’s still ample opportunity to save money, and it’s lurking in your software budgets. This is a sentiment echoed by many FinOps teams, who’ve been leading the charge in optimizing cloud costs to fund innovation.
The right SaaS can drive innovation. But all too often, it also creates chaos.
We found that the average organization has hundreds of software applications. Software is purchased throughout the organization, often on employees’ credit cards, without undergoing the proper approval processes. Renewals are often missed. Costs continue to climb. And redundant applications abound. If this sounds familiar, rest assured, you’re not alone.
Organizations must work to control the chaos that is SaaS. It all starts with visibility.
Enterprises must understand what software they have, how much they’re paying for it and who’s using it. Remember: You can’t control something if you don’t know it exists!
Once you’ve discovered all the software at your organization, you can start identifying opportunities to save a ton of money. These opportunities are usually plentiful.
According to the 2024 SaaS Management Index, at the average organization, 51% of software licenses are wasted in a given 30-day period. They also spend $44.8 million on software. In all, the average organization is wasting a staggering $18 million on unused SaaS licenses each year! Once this waste is identified and optimized, the funds can be reinvested in the business to help drive AI innovation.
Jason Owens, senior director of Global ITAM at Salesforce, summed up the opportunity well on the SaaSMe Unfiltered podcast: “I think if we could get the story out to more people about how transformative software asset management, particularly in the SaaS space where people are just out swiping credit cards and agreeing to click through terms, that more people would say, ‘Oh, we really need to invest in this for our business because we can leverage that money and then unlock value and put it into things that are transformative for the business rather than just spend.'”
The Longer You Wait, The Longer You Waste
In the world of business, there’s a lot of discussion about the benefits of taking a specific action. But failure to take action has consequences, too. The longer you wait to optimize your software investments, the more money you’re going to waste—and the less you’ll have to invest in AI and other critical technologies. Now is the time to optimize your software budget to fuel AI innovation.
By now, everyone is familiar with the hype around AI. Organizations of all sizes and industries are eager to leverage this technology to drive the business forward, and CIOs are expected to lead the charge.
CEOs and other business leaders are looking to the CIO to guide the organization through AI investments and adoption to drive efficiency. CIOs can free up the budget for AI or other investments to drive innovation. But first, they must get their arms around the software estate and ensure it’s optimized.
If history is an indicator, CIOs are up for the challenge. In 2020 and 2021, CIOs were put on the spot to keep teams connected and productive in the wake of a global pandemic. In 2022 and 2023, they were asked to rationalize those purchases. As the economy tightened and inflation rose, many IT leaders had to pull back.
The first half of 2024 brought its own set of challenges, but it also presented a unique opportunity to reassess and reprioritize technology investments. The pressure is on to ensure ROI for every project, take calculated risks and balance the focus on profitability and efficiency with growth.
As we navigate the rest of 2024, let’s build on the resilience and resourcefulness we’ve developed during the past 18 months. By maintaining a focus on efficiency and embracing smart software optimization, we can create the budget flexibility needed to invest in new AI technologies that will move the business into the future.
