Turning tech from a necessary cost to valuable investment

We are seeing organisations spend more on technology – either to transform a specific business function or transform the organisation more broadly. The options to invest in tech are vast; everything from cloud, to automation, Internet of Things (IoT), Quantum computing and the Metaverse are on the table.

However, while there is immense choice, not every approach will deliver the value for your function or overall business that you are hoping for. This is less likely to be about the technology itself, and more likely to be about how well your technology approach is aligned to your overall business strategy. 

I had the opportunity to discuss this topic with a panel of experts at a recent KPMG event. Our participants were Su Crighton, Director, Cloud Transformation Practice, KPMG; and Louise Pritchard, Cloud Transformation Senior Manager, KPMG. We were also privileged to be joined by Ruby McCormack, Technology COO, Kantar. Here are some key takeaways from our discussion.

A core issue we see organisations face when seeking value from tech is viewing it as a ‘necessary cost’ to be managed rather than as an ‘investment’. Su explained that the former view can be limiting, as it often leads to a focus on reducing tech spend. Instead, by seeing tech as an investment, you look at it more holistically and stand a greater chance of realising benefits.

“Technology costs should absolutely be considered as an investment in the same way as you would for any other business initiatives,” she said.

Technology value can come from making the business more efficient, to enabling the innovative delivery of new products and services, or underpinning major transformation.

“The real question is around how you maximise the value from that investment,” Su said. 

Another issue when it comes to realising tech value is that new tech is often seen by CIOs as a potential cost saver for the business. In particular this happens with cloud platforms, as you don’t need to invest in on-premise infrastructure. However, Louise warned that the idea of ‘tech as a cost saver’ can be a myth.

“You've got double-run costs (as you typically start up cloud platforms while running old technology), stranded costs where things don't go to plan… if you are a large, complex estate, you need to stand up a five-year programme,” she said.

Implementing a technology transformation may require hiring specialist cloud engineers, which can be costly to acquire in today’s competitive market. There are also costs aligned to partnering with vendors, and importantly, cloud security costs. 

In short, if you don’t carefully understand the way your organisation uses, purchases and runs technology, it is most likely that you won’t realise the potential cost benefits. 

Organisations often grapple with working out where tech spend is best managed, which can also impact how much value they get from tech investment. This can be especially challenging if there are different people across business functions sourcing technology from various providers.

Ruby thinks the ideal situation is when the business function leaders and technologists work closely together and are aligned on strategy. This way, there can be a positive two-way relationship and open discussion on investment strategies and expected outcomes.

“I think changing the culture of how everybody in the value chain (works together), from your software engineering team to your business team, to your product team, to your strategy team (is key). I see those areas starting to merge much more in making those decisions,” Ruby said.

A smart way to get greater value out of technology is to ensure that you use it to optimise your products and services. Ruby said this is key to Kantar’s approach.

“We're still in the process of maturing our cloud strategy and we're working hand-in-glove with our business to understand what the new customer requirements are, as we're pivoting from a services-based organisation into a technology and product-driven organisation,” she said.  

It is helpful to review how different cloud platforms can support product initiatives. Likewise, consider how to build technology capability in a way that can be replicated and scaled across different business functions. 

“Sometimes that transformation to optimise does take a long time, and sometimes businesses don't want to wait a long time to see those benefits…so we are trying to be fast, start, try and see, and then at the same time educate our business about the requirements they should be looking for to help guide us in what we focus on as well,” she said.

To really gain the most from tech investment, it is clear that it takes a holistic approach to understand all of the costs and ways to use the technology for business impact. Importantly, it’s about making sure that new technology is not simply placed on top of old processes and operating models.

A core challenge is knowing what investments will really benefit your business. Louise recommended experimenting with a minimum viable product and having your teams test and learn what aspects of the technology are necessary can help. Considering broader factors such as how the technology assists with speed to market, agility, capacity and flexibility can further indicate the real cost and benefits. Switching off unused systems and ensuring data is clean and properly archived also reduces costs and increases value.

Of course, if you need assistance with your technology strategy, cost and benefit analysis, or cloud platform sourcing and implementation, our expert team at KPMG  is here to help.