This is the third and final article in a series that teaches you how to use industry-standard calculations to assess the value of IT expense management solutions from Tangoe. Use this guide to estimate your potential savings and ROI. Don’t miss the other articles on telecom savings and mobile savings.
Keeping a lid on cloud costs is a top priority for innovation leaders everywhere. But while the goal is clear, many leaders don’t always have a clear estimate of how much time and money they stand to gain by improving cloud expense management.
This is where Tangoe’s value equation guides can help.
Tangoe used historical data to identify the following industry-standard calculations which give business leaders basic rules of thumb for unpacking the ROI of a cloud expense management solution and estimating how much they stand to save. The average savings below are based on tracking $15B in IT spending and working with enterprises of all sizes to optimize their tech investments. With some simple math, you can use these insights to calculate your own savings potential.
IaaS Expense Management: How to Estimate Your Savings Potential
These value equation guides can help you with the calculations below: Get the IaaS savings guide and the SaaS savings guide. Need more help? Tangoe offers customized ROI reports too. Request one here.
Plan/SKU Optimization: Smarter Purchases Save You +10%
Option overload is rarely talked about, but the struggle is real for cloud decision makers. When IaaS services present thousands of service plans to choose from, the human brain is no longer the right tool to make sense of the mountain range of SKUs available.
Selecting the most cost-effective IaaS service requires AI algorithms, but most companies don’t have a virtual analyst guiding their purchasing decisions. This explains why 10-15% of IaaS spending goes to waste. How much money could you put back in your cloud budget by reducing spend by 10 or 15%?
Learn how AI powers Tangoe’s cloud cost optimization solutions.
Instance Pausing: Avoid Idle Resources and Save 5-10%
Idle resources can still cost you money if you forget to turn them off. Instance pausing features are high-value money-saving tools, because they stop the billing meter from running while IaaS resources are not in use.
Those who neglect to use these instance pausing capabilities typically pay 5-10% more than necessary. Use this rule of thumb to see how much you could save across your multi-cloud environment.
See how Tangoe makes multi-cloud instance pausing easy.
Cloud Software Recovery: Consolidation Saves $20K-100K
Research shows most companies use at least three different technologies to manage their cloud expenses. Upgrading to a purpose-built FinOps platform can reduce that number, saving money by consolidating tools and implementing solutions with wider reach.
How much money do most companies recover? Data shows, on average, converged FinOps solutions and the removal of unnecessary cloud software can cut costs by $20K to $100K. See how one firm traded in their old toolset and saved big with Tangoe One Cloud. Where would you consolidate your toolset? And how would you expand your investments, if you had $20K or even $50K more in your cloud budget?
Reports, Budgets, Governance: Staffing Cloud Financial Analysts
Financial management is key in curbing cloud costs, but it might surprise you just how long it takes to get the work done. Financial summaries are necessary in keeping IT and finance teams aligned in their efforts, but capturing information across multiple provider dashboards can slow the process for IT financial analysts. Comparing budgets to actual expenditures and forecasting spending can take days and or even weeks when systems aren’t integrated and processes aren’t automated.
Data shows companies spend 6 hours per report when compiling cloud financial data. Properly managing IaaS expenses – performing tasks like budget management and forecasting activities – requires at least a part time position. Industry averages show FinOps leaders typically dedicate .25 to .50 FTE on average to cloud financial management. How much time and productivity could you gain if Tangoe took on this work for you, providing an automation platform and fully managed service?
Usage, Alerts, Allocation: Shared Expenses Plunder Productivity
Many of the prerequisites for cloud optimization lie in tracing where cloud dollars go and how cloud services benefit the organization at large. Financial analysts are charged with tracking cloud spending and proactively alerting to any cost overruns before invoices hit.
But harder still is the responsibility of handling cloud cost allocations.
Because many infrastructure services and software contracts are shared across the organization, expenses must be charged back to the departments and business units that use them. However, when back-end financial systems and FinOps platforms work in siloes, cost allocation work becomes unbearably manual. One company turned to Tangoe when they could no longer manage their cloud costs using a 100K-row spreadsheet.
On average, companies need:
- 1 full-time employee dedicated to cloud usage tracking and cost governance alerts
- 1 part-time employee (.25 to .50 FTE) dedicated to cost allocations and chargebacks
The culmination of these direct and indirect costs demonstrates the value of an automated FinOps software platform and fully managed service.
Next, we explore cloud software savings.
SaaS Expense Management: Estimate Your Savings Potential
Shadow IT already consumes 30-40% of IT budgets, and Gartner expects unsanctioned application purchases to jump from 41% to 75% by 2027. One of the biggest drivers is Generative AI with 78% of employees using GenAI apps without the permission or knowledge of their employers. If you’re not using a SaaS management solution yet, it’s time! But how do you justify the investment? Here are some industry-standard principles to estimate how much time and money you could save.
Shadow IT and Maverick Buying Reductions: Cut Your Spending by 6.5%
Unknown and unauthorized SaaS applications are already in use in your organization. Discovery methods can help identify them, ranking which ones are the biggest threats to your security posture and your budget too. Furthermore, cracking down on Shadow IT can prevent waste and avoid unnecessary expenditures.
On average, SaaS expense management solutions can save companies:
- 5% of their total SaaS spend by reducing waste caused by unknown or unauthorized purchases of SaaS licenses
- 1.5% of their total SaaS spend by reducing rogue procurement activities
Together, that’s 6.5% savings! Can you quantify your savings?
Redundant Licenses & Underutilized Apps: Get a 7% Boost in Your Budget
You can’t lower costs if you don’t know which applications are in use, how many software licenses your employees have, and how each tool is being used. This contextual intelligence is essential in identifying two key sources of overspending:
- Redundant apps and licenses that (once eliminated) can give companies more leverage on their bulk price discounts. This includes licenses purchased outside of the official corporate contract as well as consolidation opportunities where overlapping apps are purchased from different vendors.
- Unused or under-used assets, allowing SaaS managers to reallocate licenses to other employees or shift employees to a lower tier license without impacting their productivity
Explore how one company trimmed $183K off their Microsoft 365 spending.
On average, companies can reduce their overall SaaS costs by:
- 2% per employee when they identify and consolidate redundant apps and licenses
- 5% per employee when they reallocate unused licenses or utilize tiered licenses more efficiently
What would a 7% increase in your SaaS budget look like?
(Not sure how much you spend per employee on SaaS? Use this general average: $1,500 per employee.)
Reporting, On/Off-Boarding, and Security: Effective SaaS Management
A lot goes into managing applications, SaaS security, and license assignments, but how many full-time employees does it take to effectively oversee your software portfolio? Furthermore, how much time could you save if you let SaaS experts do this work for you? Here’s what the data shows.
With a SaaS management service, companies can gain significant productivity:
- .25 FTE in time and labor needed to produce recurring and ad-hoc reports across all departments and stakeholders
- .50 FTE in time and labor required to manage SaaS license assignments and reassignments for each major app, particularly during employee on-boarding and off-boarding
- 1-2 FTEs can be reduced by automating SaaS security and compliance tasks
- In addition, 60 hours per app can be saved simply for the general oversight of your total SaaS stack and basic management tasks for primary enterprise SaaS apps
These value equations can help you tally your potential savings total from the exercises above. Get the IaaS savings guide and the SaaS savings guide for a quick summary.
Sharpen Your Calculations with a Personalized ROI Analysis
Want a customized ROI evaluation for your business? Tangoe offers free consultations that dive deep into your financial management health across mobile, telecom, and cloud technologies. You’ll walk away with action items for making tangible improvements and a customized ROI report showing you the value of an investment in Tangoe’s software and services. Email us at Sales@Tangoe.com.
Ready to assess your ROI in other arenas? Don’t miss the other articles on telecom savings and mobile savings.