The practice of IT cost optimization combines knowledge from different parts of an organization and is a financial exercise that requires technical expertise while also putting user interests at the forefront, thus helping to reduce barriers to digital change management implementation.

Digital adoption in business is a key concept in IT cost optimization, as the flexibility of new technologies makes it easier to find ways to reduce costs.

IT cost optimization’s outcomes might lead to vendor changes or the elimination of redundant apps. But they could equally emphasize the value of digital adoption projects for achieving efficiencies in digital resources.  For example, by providing employees with the necessary training and tools to optimize their use of technology, a company can reduce its overall IT costs while improving the user experience and productivity.

This article will support anyone seeking to optimize costs in their organization. It will explain IT cost optimization before offering a complete set of ideas about how a business can get the most value out of its IT resources.

IT Cost Optimization Explained 

IT cost optimization is a strategic business process that seeks to drive spending and cost reduction to maximize the value obtained from business services. 

IT costs can be a huge part of operating expenses. As such, strategically optimizing IT costs helps to realize long-term business goals. The process will often include the following: 

• Attention to the procurement of IT services, ensuring that the company obtains the best pricing possible; 
• analysis of pricing models and subscriptions; 
• careful monitoring of all IT costs; 
• seeking to standardize software provision arrangements, wherever appropriate; 
• the removal of redundant technology and half-baked implementations; 
• evaluating the ROI on IT services across different business units; 
• where inefficiencies are found, advising on alternative solutions, including automation; 
• finding ways to introduce new IT innovations and strategies. 

The optimization process should start with implementing IT solutions for a business. It then continues for the duration of a company. Unlike cost-cutting, optimizing costs does not conclude. 

Effective IT cost optimization finds ways to link the day-to-day experience with the impact of a particular strategy and connect engagement with the operational or financial outcomes that matter to any business.  

Two types of cost savings: Cost-Cutting and Cost Optimization 

Cost-cutting and cost optimization may sometimes lead to similar outcomes, but they are fundamentally different processes. 

A cost-cutting exercise is a one-time event, mainly driven by budget constraints. Cost-cutting is always unpopular, even if it is necessary. The thing is that cost-cutting can hold a company back for years. Reduced IT infrastructure will make it harder to achieve stable growth. And once IT resources are removed, company leaders will be reluctant to reinstate them later. 

By contrast, cost optimization seeks the best business value. Reducing costs might turn out to be a convenient by-product. But the goal is clearly on the efficiency of essential IT resources. 

Cost optimization should be conducted on an ongoing basis. A recent Gartner report showed that over 40% of managers did not achieve their optimization goals within the first year. This reminds us that managers seeking cost savings need to set out with the best possible strategies; and that they need to wait to see results. 

IT Cost Optimization: Creating Inherent Value

IT costs can be challenging to monitor. They can easily get out of control: and that’s why it’s so important to use optimization strategies to eliminate redundancy, excess expenses, and needless features. 

It’s natural to think about reducing the cost of IT resources as efficiency. However, another way to think of the difference between cost cutting and cost optimization is through the overall value that IT resources off to a business’ services. 

Cost optimization techniques lead to the creation of more value for a company’s overall operations. After all, the IT services the business provides can be improved. And with those improvements, the cost of doing business can be far cheaper. 

The end product or service can be sold at a higher margin. As such, efficiency is only the short-term goal of cost optimization. Creating value for the company is the more important goal. 

IT Cost Optimization Principles

Some basic underlying principles support cost optimization. In particular, three areas should be a priority for the optimization process: transparency, the human side of the process, and finding ways to continually monitor the systems. 

Financial Transparency

First, IT cost optimization and financial transparency goes hand-in-hand. 

IT managers should not be defensive when IT services are threatened with budget constraints. Instead, they can use great optimization strategies to illustrate and explain their needs. 

Creating complete transparency is enough to prove the business value of the money spent everywhere. If C-suite staff understand the importance that’s coming out of their IT vendor investments, the chances of maintaining a reasonable budget improve. 

People and Processes 

When businesses decide to go through a digital transformation of their processes, innovative technology is only part of the solution. It takes the right people to operate and connect with new technologies. In other words, IT processes don’t make sense without the staff implementing and using them. 

So, people should be an essential focus of the process, too. Reducing staff numbers is an incredibly worrying decision. Implementing software that streamlines accounts, finance, or dispatch is great. But those units will struggle to adapt without well-trained staff who understand their area exceptionally well. 

Good recruitment, training, and deployment practices will ensure that the new technologies in a business have the experts to go with them. IT cost optimization is a long-term strategy, not a one-off event. Like any long-term strategy, it’s essential that staff can change with the new demands of the company.

Business Process Management (BPM) Tools

Business process management (BPM) tools are another important part of IT cost optimization, as these can help businesses automate their processes and improve efficiency. Furthermore, IT cost optimization is often a strategic decision that requires buy-in from all levels of an organization, so it’s essential to involve everyone in the planning process.

BPM is a software solution that automates tasks, manages processes, and handles process logic. It is geared towards large businesses but can also be used by smaller ones. BPM systems optimize and accelerate processes, increasing efficiency. Business process automation keeps work organized and streamlined so your team can focus on more important tasks, resulting in a higher value of work.

BPM tools are being utilized more and more in today’s digital workplaces. They can help businesses streamline their processes and increase efficiency, which is a key part of IT cost optimization. Additionally, IT cost optimization often involves strategic decision-making that requires input from all levels of an organization. Therefore, it’s important to involve employees and managers throughout the planning process to ensure everyone is aligned and on board with the changes.

Optimize costs with Continuous Monitoring 

Monitoring is at the heart of any ongoing cost optimization project. 

In some respects, cost monitoring is highly technical. It will take a specialist to understand what parts of the system need monitoring and the overall price of services. Fortunately, extensive cloud services now provide cost dashboards to monitor and control spending. 

But even with the most efficient structures in place, monitoring is a matter of people management. Monitoring requires that people use packages effectively – for example, using the appropriate tags in Azure. 

Continuous monitoring has a prominent link to the principle of financial transparency. When every user knows the cost of the services they are using, they will be better placed to consider the best way to achieve a good ROI. 

12 IT Cost Optimization Techniques

Once a company understands the basic cost efficiency principles, it can apply specific cost optimization strategies. The following twelve ideas will help with any cost optimization initiative.  

1. Rationalize Enterprise Technology Portfolio

A good initiative can start with a transparent audit of all the technology that the company currently uses. It can be as simple as a spreadsheet listing all the applications used within the organization, detailing the features, costs, and intended users.
An essential application for one business unit may be completely unheard of elsewhere. As such, keeping a clear eye on all the subscription-based applications within an origination can be difficult. Rationalization means that you know what’s going on and where. 

2. Leverage Shared IT Services

Once an organization knows its IT resources, it can decide how to share its subscriptions more effectively.
When services are used across different business units, a business can make sure that they are pursuing a shared procurement and subscription package. This can lead to surprising cost savings through more competitive pricing models. 

3. Opt For Cloud Services

Cloud resources are now one of the dominant ways of bringing technology into a company. It would be challenging for some applications to mobilize a genuine site-based option.
Cloud-based software is itself a great cost optimization technology.

Cloud-based software can often be more flexible than existing systems, making it easier to adapt the service over time. With that functionality, cloud transformation can more rapidly lead to business innovation. 

4. Integrate and Modernize Data Centers

A data center is one of the most vital parts of IT infrastructure, even though many users will never think about it. A report from McKinsey suggests that better data management can reduce costs without negatively impacting business processes: “for example, by offloading historical data to lower-cost storage, increasing server utilization, or halting renewals of server contracts.”

As data needs grow with a company, so will its storage needs. Bringing every storage provision into one data center will inevitably reduce costs and maintain the simplicity of operations. 

5. Re-evaluate IT Asset Management and Operating Costs

IT asset management monitors all aspects of IT infrastructure. It provides a detailed understanding of the specific items held by a company. That will include detailed information on servers, printers, and computers; the software running on particular machines; and networked devices.

On a day-to-day basis, good asset management helps to support customers. For cost-saving purposes, it can help set a budget for future years. If the organization’s hardware is entirely up-to-date, they know they can avoid upgrade costs in the next few years.
But if some terminals require an upgrade, asset management software can quickly identify the scale of investment costs. 

6. Improve IT Budget Transparency [JH adapted] 

Managers can achieve cost savings simply by understanding full information about their current spending on IT. A full overview of the company’s IT spending means that excess spending can be easily identified and quickly cut back. 

7. Increase IT Demand-side Spending

Businesses may lead some IT resources with supply-side spending. In other words, if a particular package is offered to staff, they can use it.
However, demand-side spending can lead to far more efficient deployments of technology. More demand-side spending means new apps and functions are offered when required. 

8. Exploit Robotic Process Automation and Artificial Intelligence

There’s now a wide choice of software available to help automate simple tasks in an organization. Those include the routine aspects of accounting, payroll, and workload management and even extend to parts of training and e-commerce. Automated processes are efficient and reliable, often offering an excellent ROI and overall cost savings. 

9. Evaluate Digital Business Transformation Ideas

Companies that want to go further with process automation and AI can start to consider a full-scale digital implementation strategy.

A large-scale digital adoption policy can lead to major savings in how a company works.  Digital transformation is a business-wide transformation project that uses digitalization to achieve business growth.

Applying digital solutions to business processes can lead to highly effective savings in the long term. 

10. Optimize Workforce Management (WFM) 

WFM covers many areas of business operations, including forecasting, scheduling, timesheets, payroll, compliance, and more. While it is not only about IT, WFM is almost totally automated now. A well-running set of WFM software will lead to savings in all other parts of the business. 

11. Improve Data Transparency

Shared knowledge of data holdings can improve many organizational working practices. When staff can identify information about data, they will find it easier to build collaborations between business units instead of re-collecting data in any form. 

12. Organizational Discipline and Digital Adoption Training

Finally, it’s worth remembering that staff are at the heart of good IT cost optimization work. Cost savings should not make their job more complex or confusing. Excellent training ensures that the company’s application portfolio is used effectively by staff. Good digital adoption ensures that companies optimize existing assets’ value using new methods.

How To Build A Fool-Proof IT Cost Optimization Strategy

On top of the strategies described above, three major areas can help to make cost optimization effective. 

Outsource Specialist Staff

Getting the most out of internal IT resources may involve long-term employees. However, for more specialist work, outsourcing can be highly cost-effective. Outsourcing helps bring specialist knowledge into a company, even without a permanent workload.

Hybrid Cloud and Multi-Cloud Adoption

With this strategy, a company’s IT infrastructure comprises private and public cloud services alongside on-site storage. Cloud solutions make it far easier for a company to pay for the IT resources they need without a bloated application portfolio that doesn’t fit their needs. A hybrid system enables a company to use the best cloud systems for whatever applications are required. 

Virtualization

A wide-scale virtualization program is a convenient way of rationalizing platforms used by a company. When every application needs a dedicated physical server, each server will likely be significantly underused. With virtualization, one centralized set of computing resources is used to create virtual servers and operations that can be rolled out as appropriate. 

Virtual servers are far easier to create than physical servers and help reduce downtime risks. 

The Complete IT Optimization Framework: Obtaining Great Business Value 

As previously mentioned, it’s too easy to mistake optimization and cost-cutting. Short-term thinking can lead to long-term problems that hinder a company’s growth. In terms of missing out on digital investment opportunities, reducing overall organizational efficiency, and stifling innovation. 

Given the managerial difficulties of the process, a company may use its staff to seek continuous improvement in its IT efficiency. However, many businesses benefit from using outsourced cost optimization services, either as a one-off consultancy or on an ongoing basis. 

A cost optimization framework should be practical across the company’s operating expenditure. But the scale of IT services means they have a vital role in cost savings. 

The post 12 Proven IT Cost Optimization Methods For Public and Private Sector Enterprises appeared first on Digital Adoption.

In this extensive category, there are many opportunities to significantly reduce costs without impacting central processes or the cost of goods sold. Digital adoption solutions are becoming the go-to method for optimizing processes and increasing efficiency in companies. 

These solutions allow internal employees to efficiently streamline their workflows and improve organizational collaboration with minimal effort. 

As we will see, some operational expenses can be reduced without significantly impacting the company’s work. Indeed, a strategy like hybrid working is likely to be welcomed by many staff members. 

But like all drives for efficiency, reducing operational costs must involve some form of organizational change. It’s simply not possible for a company to keep behaving in precisely the same way and expect to achieve growth. Becoming more efficient, reducing costs, and increasing revenues all mitigate the barriers to organizational change. 

Companies that cut costs may accidentally impact their long-term business goals. Fortunately, many strategies to reduce operating costs are easy to implement. With that in mind, this article will discuss some simple steps a business can take to reduce costs. 

What Are Operational Costs?

A business’s operational costs include all the expenses incurred from its day-to-day running. 

That might include: 

• Sales Costs 
• Salaries, Wages, & Other Labor Costs 
• Insurance 
• Property Tax
• Advertising/Marketing 
• Office Maintenance 
• Office Supplies
• Utility Bills (electricity, water, gas) 
• Travel Costs

We calculate operating expenses by subtracting gross profit from operating income.

 OPEX = Operating Income – Gross Profit. 

Operational costs are not the only type of costs that a business incurs. Other forms of cost include: 

• Cost of goods sold. The cost of producing a business’s services is not part of operating costs. 
• Capital expenditure (or CAPEX). One-off machinery, IT hardware, or premises investments are not part of operating expenses. In some jurisdictions, capital expenses are not taxed – while operating expenses are) 
• Depreciation of property. A business’s material property will incur wear and tear over the years. This does not count as an operational cost. 

Understanding operational costs are important because it can give a clear idea of the efficiency of a company’s business activities. 

The Types of Operating Expenses 

Operating costs can include fixed COSTS and variable costs. The category also includes overheads (which, in many cases, are similar to fixed operating expenses). 

Fixed Costs

These costs do not change with the amount of work the business does. Office rent will stay the same in busy months and slow months. Likewise, insurance, utility bills, and compliance fees don’t change. 

Fixed costs are usually included in the sum of operational costs and the cost of goods sold. 

Variable and Semi-Variable Costs

Variable costs will go up and down depending on the rate of production in a business. 

Fees from credit card providers or an eCommerce platform are a clear example. For businesses requiring manual labor, electricity, fuel, and other workshop supplies will vary. 

Overhead Costs

Overhead costs (or just “overheads”) are fixed costs. Overhead costs do not include anything that will go directly into producing a product or service. The rent on an office or the mortgage on a factor are examples of overhead costs. 

The Importance of A Good Operating Margin

An operating margin, sometimes called the “operating profit margin,” is a percentage calculated by dividing the operating income by net revenue. It’s similar to the operating expense ratio used in real estate forecasting. 

A higher percentage means the business will produce larger profits. There is no abstract measurement of a “good” operating margin. A business’s operating margin should be compared to other companies in the same industry. 

However, there are good reasons for every business to improve its operating margin as much as possible. It helps a business to improve cash flow, maintain a healthy operating income, and ensure that relationships with external vendors and partners are successful. 

A good operating margin can lead to cost savings. For example, a good operating margin means a business is far less likely to pay late fees for missed invoices. 

Are Operating Costs The Same as Selling, General, and Administrative Expenses (SG&A)?

In many cases, Operating Expenses and SG&A are identical. When companies minimize their expenses by focusing primarily on revenue-generating activities, it’s unlikely that they will incur any operating costs unrelated to SG&A. 

Operating costs not included in SG&A may consist of interest on the debt. More substantially, Research and Development costs will not be part of SG&A. 

These costs may be vital to the long-term viability of a more significant business. Still, they don’t have a direct relation to immediate revenue-generating activities that companies are built around. 

The Challenges of Maintaining Healthy Operational Costs

Running an inefficient company is far easier than running an efficient company. And When it comes to OPEX, some spending reductions will feel challenging to cut back on. 

After all, no one wants to make life more difficult for their staff. They’ve got enough to deal with. So cutting back on business trips, cutting back on office parties, or extensive hot desk facilities runs the risk of reducing employee satisfaction. 

Like any change, changes in cost allowances need to be managed well. 

Furthermore, when essential operating expenses increase, it can be difficult to budget. So good monitoring, evaluation, and forecasting are all essential. 

15 Actionable Methods To Reduce Operational Cost

Saving money in a small business is important, and it is not always difficult. 

Here are 15 steps most businesses can take to ensure that their expenses are helping them achieve their business goals: 

1. Establish A Cost Reduction Strategy 

Although companies can reduce operating costs quickly, starting the exercise with a clear strategy is wise.

The strategy may begin simply by looking closely at business expenses and becoming more aware of the costs coming out of the company’s bank account every month. Small businesses often do not have a straightforward tracking method for each operating cost.

But taking a bank statement and looking closely at everything that’s coming and going out automatically demonstrates whether or not more extensive improvements need to be made. 

2. Audit and Terminate Redundant Services and Applications

Reducing redundancy makes for an effortless way to save money without negatively impacting business functions.

When a business starts looking closely at its expenses, it might realize there are overlaps in the services they buy. If they’re paying monthly for both Google Drive and Dropbox – there’s a quick and easy saving to be made. Or, a small business might only use a few features from a major software subscription. They’d likely get better value out of the free version.

With a careful audit of software subscriptions, either as a one-off event or an ongoing process, businesses can quickly save money without negatively impacting their business.

3. Streamline Business Processes With Automation Software 

It’s no good having applications a business doesn’t need, but automation software is a great way to reduce expenditure in the long term. Even though automation requires a business to spend money, those costs are quickly recouped. 

Automation will look different in different industries. Typically, it takes the hassle out of the most tedious jobs in monitoring, data collection, and reporting. Automation is never a replacement for the expertise of well-trained staff. Most businesses can benefit by applying software solutions to accounting, communications, payroll, and even marketing.

With the right KPIs, metrics, and goals, you can achieve (and measure) the ROI of effective change management by implementing digital solutions. 

4. Minimize Surplus Expenses

Very few businesses can operate with 100% efficient spending. There will always be times when the cost of events, travel, and production doesn’t lead to improved revenue.
However, excessive spending may happen all over a business without the managers knowing a thing about it.

That’s why the best people to identify inefficiencies in operating costs are the rank-and-file staff. Is the company sending out too many people on business travel? Does the air con consistently stay turned “on” at the weekends? Is everyone printing out emails?
The best way to know is by asking. 

5. Reduce The Electricity Bill (Turn Off The Lights)

When everyone in a company works hard to increase profits, it can be easy to forget about energy consumption. If there’s a bit of wasteful spending on electricity or gas, isn’t that compensated for by additional revenue?

Everyone can agree that an office space needs to be comfortable and light for all users. But on an office-wide scale, electricity can be a major source of wasteful spending. Turning off lights, judiciously using heating (and cooling), and restricting energy-hungry devices can significantly reduce operating costs.

Businesses of every size can benefit from this process. Remember that the use of energy is not always predictable. For example, the UK Office for National Statistics study found that small businesses had a far higher energy intensity than large businesses. Every company should look closely at its use of energy. 

6. Reduce Carbon Emissions and Environmental Impact (Go Paperless)

Many consumers now assume that every business is responsible for reducing its carbon footprint. So when it comes to operating expenses, a company that commits to minimizing its environmental impact stands to improve its reputation and save money.

Some positive changes can be achieved through culture shifts. Printing agendas off for every meeting is unnecessary if your staff works on laptops or other portable devices. Deeper investments can include better insulation, energy-efficient equipment, and energy-saving lightbulbs. 

7. Adopt an SEO Strategy

Full-service marketing costs can be extremely high for businesses trying to cover all possible strategies.

Search Engine Optimization (SEO) strategies are an excellent long-term solution to inbound lead generation. Even though the costs add up, good SEO will lead to far more productive work in the long run.

But a business’s content, backlinks, and UX investment can realistically lead to long-term leads and sales.

8. Hire Interns or Virtual Assistants 

Interns can represent great value for money.
A good company will pay an intern in line with the local cost of living. Once they have spent a few months working, it’s clear whether their skills are a good match. They can slip into a permanent role without the costs of recruitment or turnover.

Virtual assistants can be very flexible, adapting to the particular administrative needs of a week or month. 

9. Outsourcing and Subcontracting

Outsourcing work to freelancers and contractors can be a very cost-effective way of getting work done.

For example, a small business may not need a full-time hire to work on marketing. But an ongoing arrangement with a freelancer could help them to fulfill all their needs.

Freelancers and contractors often have a high ticket prices. But, short-term projects can produce great results without the extensive costs of hiring and maintaining a full-time or part-time staff member. 

10. Streamline Financial Operating Processes

Finance and accounting are at the heart of a cost-saving initiative.
A company’s current staff may be on top of paying invoices, administering payroll, and processing expenses. But they won’t always have the time to make those processes completely efficient and transparent.

Implementing accounting software like Quickbooks or Xero can be a great way to monitor all the costs a company incurs. The software supports existing staff and makes the ongoing process of reducing costs far easier to handle. 

11. Consider Competing Vendor Bids

Procurement is a serious matter for big businesses. They know that pricing systems can be both competitive – and not at all transparent.

A consistent tender process can help a company get the best deal on any service they buy. This may involve some outlay initially but will reduce operating costs significantly in the long term.

Research from Gartner in July 2022 reported that “two in five IT leaders regret technology purchases due to unfavorable terms or overpriced fees.” Evaluating competition makes it easier to see who might be taking advantage of a naive company. 

12. Transition Staff To Hybrid or Remote Work

The global pandemic introduced many companies to remote and hybrid working possibilities. Since then, research from McKinsey has shown that “More than four out of five survey respondents who worked in hybrid models over the past two years prefer retaining them going forward.”

Although relatively few companies are fully remote, the opportunity to work from home offers excellent benefits for employee satisfaction. From a company’s point of view, the staff is likely to be more productive while helping to reduce operational costs at the office itself. 

13. Reduce Physical Office Space

Companies that embrace the remote or hybrid working model can save their office space significantly.

A smaller physical office does introduce some new tasks. For example, an office manager must keep careful track of desk availability.

When long-term physical downscaling isn’t an option, redundant desks or offices can often be leased to freelancers at a fee. 

14. Pay Your Invoices and Bills Ahead of Time
    Paying in cash is preferable to credit for many vendors. Getting expenses out of the way makes it easier to see the company’s current account balance. And best of all, it means no late payment fees.  

15. Consolidate Organizational Events and Activities

Bringing together different events can be a sensitive issue. But a clear direction can seriously help to reduce operating costs.
If there are several birthdays in one week – can they all be marked simultaneously? Is one department holding too many away days? Stacking these events can lead to significant savings per participant. 

How Far Can A Business Save Money With Improved Operational Expenses? 

There’s no question that the operating costs businesses incur can often be reduced. By taking immediate action and ensuring that cost reduction is an ongoing process, businesses of any size can become leaner, more efficient, and more profitable. 

As a business, one of your main priorities is to reduce overheads while still providing high-quality services and products to customers. While many companies look towards traditional methods such as automation or outsourcing to achieve this goal, digital transformation presents the most cost-effective solution in the long term.

With digital transformation, a company can streamline its operations, improve business processes, and increase productivity using technology. For example, implementing a cloud-based document management system can eliminate the need for paper files and allow your team to access documents from anywhere and at any time.

However, operating costs can only be cut so far before they start impacting how small business functions. Cost savings may be a false economy if efforts to reduce operational costs lead to a hostile work environment. 

As described above, small businesses can start by rigorously evaluating their outgoings, and surplus spending can only be eliminated when managers see it.

The post 15 Actionable Methods To Reduce Operational Costs appeared first on Digital Adoption.

One particular sector experiencing this change is the financial and banking sectors—which have successfully digitized the delivery of services thanks to accelerated digital banking adoption efforts. Digital adoption plays a pivotal role in the transition from brick-and-mortar banking to digital banking and has become a vital component of the transformation strategies of financial entities. 

Previously, the only way for customers to complete critical financial errands was to physically visit their bank branch—which can involve long queues and unnecessary paperwork. 

Now with online banking apps, e-wallets, and digital banking channels giving customers the ability to make e-payments, manage their funds remotely, and make instant financial decisions in real-time, the everyday use of digitized banking services has become widely exploited.

However, to address changing customer needs while navigating the chaos caused by COVID-19, financial service providers are embracing digital disruption to reinvigorate traditional business models. 

In this article, we’ll cover everything you need to know about digital banking adoption in today’s zealous digital landscape—covering the latest trends, challenges, research, and solutions currently permeating the sector.

What Is Digital Banking?

Digital banking describes the complete digitization of end-to-end banking processes and is an umbrella term that encompasses both online and mobile banking. 

This typically involves deploying web-based products and services alongside AI-empowered process automation to facilitate online and mobile banking app financial management. This allows customers to complete transactions and access banking services online via any device, browser, or app. 

Statista reports that digital banking users in the U.S will grow from 197 million users in 2021 to almost 217 million users by 2025.

The digital banking model is often known as the “omnichannel” approach because customers can access their bank accounts 24/7, regardless of where they are. The need for digital banking solutions stems from increasing customer demand for digital solutions for accessing and managing their financial data. 

Forbes says, “Together, online and mobile banking creates the digital banking umbrella, giving people access to banking wherever they may be—or, in some cases, wherever they’re graced with secure Wi-Fi and strong cell signal.“

What Is Digital Banking Adoption?

Digital banking adoption refers to the rate at which consumers, businesses, and organizations adopt new digital banking services. This can include the use of online and mobile banking platforms and apps, e-payments, money transfers, loan services, and other contemporary financial architecture offered through digital mediums (e.g., cryptocurrency).

Factors influencing digital banking adoption include consumer preferences, competition in the industry, technology advancements, regulatory requirements, and marketing strategies. Several digital adoption strategies can be used to accelerate digital banking transformation rates, including marketing and communications campaigns, developing partnerships with third-party providers, and improving overall customer experience.

With the recent global pandemic, there has been a sudden shift to digital banking for many people. This was likely accelerated by other existing trends—such as the growing use of digital channels for various transactions, including banking, and the wider use of teleconferencing/video calls instead of face-to-face meetings. 

Digital Banking Adoption Is Increasing Globally 

Digital banking adoption models have graduated from simplistic add-ons and online features that support physical visits to bank branches, into a predominantly digital-first ecosystem where financial management is mostly done online.

In developing economies, digital banking has become widespread ever since the rise of the internet in the late 90’s made it possible for consumers to access online financial services remotely. Statista reports that Transaction value in the Neobanking segment is projected to exceed 1 trillion U.S dollars in 2022.

Fast forward, digital banking adoption is now being embraced globally. McKinsey’s 2021 Personal Financial Services survey reveals that digital banking adoption rates in emerging Asia-Pacific markets have caught up with that of developed economies.

The survey reports that consumers in emerging Asia-Pacific markets actively using digital banking rose from 54% to 33% between 2017 and 2021—an increase of 21% over five years. The survey further details that emerging Asia-Pacific markets lead the use of fintech and e-wallets, which has resulted in enhanced digital banking solutions becoming adopted faster than developed markets.

Digital Banking Vs. Traditional Banking

Financial models are changing as consumer trends continue to shift towards an everything-online culture. Banking institutions now face the challenge of offering products across geographies and cultures connected by technology.

Borders and geography no longer limit the financial services industry, so adapting to a changing global demand has become more important than ever.

Today, modern digital banking solutions are adopted by both long-held financial institutions and financial technology (fintech) start-ups—either developing digital banking services to support physical branches or digital-only platforms (neobanks) for those offering online-only services.

Financial technology (fintech) simply refers to any organization that utilizes technology to deliver financial services—companies falling under the fintech umbrella include veteran platforms such as Venmo and emerging ones like Revolut.

Some of the most reputable financial institutions providing industry-leading digital banking services include Citi, Wells Fargo, and JP Morgan Chase—who hold the largest share of active mobile banking customers in the U.S.

These proprietary banking apps host a range of e-resources that enable customers to monitor and manage their financial assets, make financial health assessments, utilize predictive analytics, and receive tailored insights. 

However, incumbent financial bodies are finding it increasingly necessary to re-assess the limitations of legacy architecture and source solutions that deliver faster innovation and operational efficiency. 

The Emergence Of New Banking Models

To transition from traditional banking models into emerging digital models, financial institutions have begun collaborating with fintech companies to supplement legacy systems with agile architecture able to innovate as fast as competing providers. 

Alternatively, traditional banks are leveraging their infrastructure and opening up their application programming interfaces (APIs) to host fintech stacks that deploy Banking-as-a-Service (BaaS) solutions.

Along with BaaS, companies dedicated to developing financial technologies have enabled the rise of neobanks—sometimes referred to as challenger banks.

Neobanks—also known as digital-only banks—are fast becoming the go-to financial service providers best able to meet the demands of tech-conscious consumers. Insider Intelligence says there will be 40 million neobank account holders by 2025. 

Neobanks provide digital-only web-based mobile services that generally require no/low fees or traditional physical branch networks. These online banks offer slimmed-down services compared to conventional banks and are often required to partner with an established bank to acquire a license permitting them to operate. 

Neobanks that are fully licensed and offer wide-ranging financial services qualify as a new bank—their online-only operations differentiating them from traditional brick-and-mortar providers. Examples of these new banks include Monzo, Nubank, and Starling Bank.

The advent of new banks, decentralized finance (DeFi), peer-to-peer lending (P2P), software-as-a-service (SaaS), and other fintech models signify shifting societal and consumer demands towards more efficient and autonomous financial tools—and the prospective success of at least one of these emergent technologies appears likely. 

In the UK, the number of challenger banks is cropping up after the country introduced new open banking regulations alongside robust regulations provisioned by the Financial Conduct Authority (FCA). These challenger banks allow customers to collaborate with fintech and third-party providers (TPP), ultimately giving them the final say on how their financial data is shared.

Traditional financial institutions must embrace and find a way to navigate digital disruptors to catch up with the rapid innovations fintech is delivering. This means embracing new technologies and being open to competition from a wide range of service providers with different business models.

Digital Banking Opportunities

Digital banking opportunities are emerging in a wide range of areas, including digital payments, personal finance management (PFM), lending and financing services, international commerce, wealth management, e-wallets, identity verification, AI-driven virtual assistants, and more. 

As more consumers and businesses adopt digital banking services, the market for these offerings is expected to continue growing in the coming years. This presents a tremendous opportunity for organizations to develop innovative digital banking solutions and capture a share of the emerging market.

Digital banking opportunities are prospects for business growth and innovation in the financial services sector. These opportunities include:

1. More Output/Higher Margins

Customers no longer have to wait to deposit or withdraw money from their accounts or make online purchases during bank hours. Banks can now offer 24/7 services with digital banking, leading to increased profits.

2. Improved Mobile Banking Adoption

Mobile banking apps allow customers to access their bank accounts and perform various transactions, such as check deposits or online payments, at any time. This convenience can help drive higher digital banking adoption rates, especially among younger users who are more likely to use mobile devices for financial transactions.

3. Increased Borrowing & Lending Opportunities

Digital banking platforms can facilitate lending and financing services, allowing customers to apply for loans or other types of credit online. This gives businesses greater access to capital, which can drive growth and innovation in various industries.

4. Mass Adoption of Digitized Services

The mass adoption of digitized services is accelerating across the banking industry at a rapid rate.  Banks that can implement digital banking solutions at scale will be better positioned to capitalize on the growing market for these offerings. Digitized services represent a significant opportunity for organizations to expand their customer base, increase revenues, and improve operational efficiency.

5. Better Market Predictions

Data is critical for any organization because it can be used to predict the market and offer better services to customers. Digital banking is backed up with an accurate data collection mechanism. Today, the data available in banks have not been utilized as they are supposed to be mainly because the format in which they exist makes them harder to access.

Though digital banking benefits both customers and banks, it’s safe to say that the future banker will be entirely digital. As we speak, AI for banking is already being implemented by other banks, with remarkable results in some cases. Eventually, bank queues will cease, which is a fair warning for any bank or financial institution wanting to maintain a strong market presence.

The Biggest Challenges of Digital Banking Adoption

When money is involved, security is naturally a top concern. It’s no surprise that statistics from DA’s ‘digital adoption in the banking industry’ report that most digital banking providers (38%) feel that ensuring data security and cybersecurity across the network and infrastructure is a top priority. 

With digital banking and the wider digital economy growing each year, so does the threat of cyberattacks. As financial institutions continue to launch predominantly mobile and web-based services, achieving this without compromising their customers’ safety and security is challenging.

The six biggest challenges in digital banking for providers in 2021, according to our data, also include:

• Increasing competition from digital-first providers
• Building end-to-end customer journeys that integrate across partners
• Ensuring easy data interoperability and flow with external partners 
• Relevant skills and talent capabilities 

The digitization of traditional banking models allows long-held financial institutions to evolve alongside the very same technology enabling its transformation—but the adoption of new technologies and digitized services means particular attention must be placed on cybersecurity.

Phishing attacks, malware and ransomware attacks, identity theft, and fraudulent activity pose huge security risks for customers and providers alike. So banking institutions going digital emphasize enhanced cybersecurity solutions that fortify customer transactions with protective parameters.

This includes deploying antivirus and runtime application self-protection (RASP) solutions to protect core systems or two-factor authentication and biometric scanning for end-users. Digital banks are also using artificial intelligence to perform data analytics and create models that can recognize threats and anomalies. While machine learning can be taught to detect fraud by analyzing customer behavior and identifying changes using intelligent insights across large data sources.

What Is FinTech?

There is a growing number of financial technology companies revolutionizing how we bank and manage our finances. These innovative companies offer various products and services, including digital banking platforms, mobile payment systems, peer-to-peer lending networks, crowdfunding platforms, automated investment management tools, and more.

Fintech started to gain traction around the mid 90’s. At that time, it was used mainly by large financial institutions for things like back-end systems. But since then, there has been a shift toward more consumer-oriented services. 

Now fintech encompasses different sectors and industries such as education, retail banking, fundraising and nonprofit organizations, and investment management.

The fintech startups that receive the most funding are designed to overtake traditional financial institutions by being more agile, appealing to underserved markets, or providing superior service.

For example, Affirm tries to remove credit card companies from the online shopping process by giving consumers a way to immediately take out short-term loans for purchases. 

Although rates can be expensive, Affirm states that they offer an opportunity for people with no or poor credit to get loans and improve their credit scores.

The Role Of FinTech In Digital Banking Adoption

Although fintech can pose particular challenges to digital banking adoption, it also plays a crucial role in helping businesses stay competitive and relevant in the rapidly changing financial landscape.

Some critical ways that fintech influences digital banking include:

1. Increased access to capital for businesses and consumers.

Many fintech companies offer new streamlined ways for people and businesses to access capital through online platforms, mobile apps, and more. Increased capital access helps reduce barriers to entry, allowing more people to take advantage of financial services and products.

2. Streamlined user experience across multiple channels (physical, online, etc.)

To remain competitive in the digital age, banks must provide a seamless consumer experience across all channels, including physical branches, websites, and mobile apps. 

Fintech companies are helping to drive this transformation by introducing new technologies such as artificial intelligence and machine learning that make it easier to interact with customers in real-time.

3. Increased competition in the banking industry

The rise of fintech has led to increased competition among banks, credit unions, and other financial institutions. This has led to faster innovation cycles and greater pressure on traditional players to keep up with the latest technologies and trends to remain competitive.

4. Greater access to data for businesses and consumers

Many fintech startups are generating huge amounts of data through their platforms and applications, which can improve customer experiences, reduce costs, and make data-driven business decisions. 

Big data analytics tools have increased recently, particularly within the financial services industry.

Is Digital Banking The Future?

The rapidly-evolving fintech industry primarily arose as a recovery response to the economic fallout caused by the 2008 financial crash, which offered an alternative financial paradigm for those who wanted to branch away from traditional banking models. 

Since then, the number of emerging fintech start-ups has risen yearly, and with advancements in financial technology continuing to rewrite industry norms—we expect this trend to continue.

The rapidly-evolving fintech industry mainly arose as a recovery response to the economic fallout caused by the 2008 financial crash, which offered an alternative financial paradigm for those who wanted to branch away from traditional banking models. 

The components driving the development of financial technology can be characterized mainly by the rapid adoption of 4 key technologies often referred to as the “ABCDs of fintech” Artificial Intelligence (AI), Blockchain Technology, Cloud Computing, and Big Data empower fintech innovation across sectors. 

Let’s explore these technologies further:

Artificial Intelligence (AI) 

Artificial Intelligence (AI) is improving digital banking adoption in various ways. Thanks to advancements in machine learning (ML) and natural language processing (NLP), fintech and traditional financial service providers alike understand AI’s potential applications are plenty.

AI can leverage customer data to provide companies with distinct insights and predictions on customer and marketplace trends. AI’s analysis of consumer behavior using vast amounts of data from multiple sources means it’s able to make intelligent recommendations for improving the customer journey and evaluating risk scores. 

The benefits of blockchain technology have been realized for some time, underpinning the nascent cryptocurrency market and the emergence of uniquely identifiable digital assets. Based on the principles of consensus, cryptography, and decentralization, this new technology penetrates global business and established financial sectors to enhance processes, increase efficiency, and deliver transparency across the organization.

Blockchain 

Blockchain can transform the core of digital banking architecture by using its efficient and immutable processes. For example, traditional financial providers are eager to leverage digital currencies for more secure and faster transaction processes. 

One of the primary benefits of blockchain technology is its ability to create tamper-proof records. This makes it an attractive solution for banks, who are constantly looking for ways to improve the security and efficiency of their transaction processes.

For example, many banks are now exploring digital currencies as a more secure alternative to traditional payment methods like credit cards. Digital currencies can offer faster transaction times, lower processing fees, and increased transparency compared to conventional payment methods.

Moreover, blockchain technology is inherently built with security embedded, which financial service providers can rely on to fortify security capabilities, keep secure records of ownership and utilize smart contracts to execute water-tight transactions on blockchain’s unchanging ledgers.

Cloud Computing 

Cloud computing is transforming companies’ business through its on-demand infrastructure, application hosting, and software solutions. Digital banking adopters can leverage the cloud to accelerate their innovation cycles, improve customer engagement, optimize costs and ultimately enhance the customer experience.

The unique selling point of cloud computing is the flexibility and scalability it offers businesses. Software-as-a-service (SaaS), neobanks, Banking-as-a-service (BaaS), and other fintech providers empowered by the potential of cloud transformation, which helps avoid vendor lock-ins that require spending on costly software licenses. Rolling subscription models also means fintech providers face lower upfront costs when developing software hosted on the cloud, allowing them to experiment and scale business models.

Data 

Data is considered “the new oil” and, much like the natural resource, is a highly sought-after ingredient fuelling the transformation of entire industries. Traditional banking institutions depend on large data sets to maintain essential operations. This data, however, has long been deposited in physical form, which can make for unwieldy organizational processes, forecasting capabilities, and decision-making.

Data has now been digitized and is readily accessible through cloud storage and processing tools. Providers can leverage big data and analytics to gain insights on customers’ online activities- like logging in to virtual banking, transactions, web browsing, eCommerce, and social media use.

Digital banks can collect massive amounts of customer data and use sophisticated AI algorithms to decode these trends into insights that can help identify customer needs, forecast marketplace changes and optimize operational efficiency. 

Overall, the ABCDs of fintech – AI, blockchain technology, cloud computing, and data analytics – are transforming the digital banking landscape by enhancing efficiency, security, and customer experience. Digital banks that embrace this paradigm shift while focusing on their customers will be positioned to stay competitive and capture a share of the evolving market.

What Role Will Branches Play In The Digital Banking Adoption Revolution?

There is no clear answer to this question, as the role of branches in digital banking adoption is still evolving. On the one hand, some experts believe that traditional bank branches may become redundant as more consumers adopt digital banking solutions.

However, others argue that physical branches still play an important role in engaging customers and providing high service and support. In particular, many people still prefer to visit their local branch for complex tasks or in-person assistance.

As the digital banking revolution continues to unfold, it will be interesting to see how banks balance the need for both online and offline services to meet their customers’ changing needs.

How Should Banks Rethink How They Engage With Customers?

One key way banks can rethink how they engage with customers is by focusing on customer experience. Financial institutions can create personalized interactions that improve satisfaction and loyalty over time by using data analytics and other technologies to understand their customers’ needs and preferences.

Additionally, banks should consider investing in new digital tools and services that help enhance the customer journey. This might include offering more online banking products, such as personal finance apps or automated investment platforms, allowing users to easily manage their accounts from any device.

To succeed in this rapidly changing landscape, banks must also be willing to embrace innovation and experimentation to stay ahead of the competition. By continuously evaluating emerging trends and technologies, they can better understand the evolving needs of their customers and adapt accordingly.

How Should Banks Position Themselves In The Future?

To position themselves for success in the future, banks must be willing to embrace innovation and adapt to changing trends and technologies. This may involve investing in new digital tools and services that better meet the needs of their customers, as well as experimenting with new approaches to engaging with clients and improving customer experience.

At the same time, banks must also maintain a strong focus on delivering high-quality products and services to build customer trust and loyalty. By leveraging data analytics, machine learning, and other cutting-edge technologies, they can better understand their customers’ needs and create tailored experiences that drive satisfaction and engagement.

Digital Banking Transformation: The Future Of Transactions 

The digital banking revolution is changing how financial institutions engage with customers, offering new tools and services that improve convenience and satisfaction. As such, banks must be willing to embrace innovation and experimentation to position themselves for success in the future. 

Ultimately, meeting the needs of today’s digital consumers will be vital to ensuring long-term success in this rapidly evolving landscape.

The post Digital Banking Adoption: Everything You Need To Know appeared first on Digital Adoption.

But what is SaaS spend optimization? What is the business value of the SaaS spend optimization process? And why is SaaS spend optimization crucial for companies today? We will explore all of these questions, beginning with a definition.

What Is Software as a Service (SaaS) Expenditure Optimization?

SaaS spend optimization involves a proactive approach to SaaS optimization  to reduce the quantity of SaaS licenses or apps. The spend optimization process helps companies avoid SaaS waste, cost accumulation, and avoidable security risks. It tracks all existing SaaS software licenses and detects under and over-licensed SaaS applications. It also balances subscription costs and SaaS licenses against organizational needs to reduce software spend.

Companies consider cloud services superior as they offer better customer advantages due to the flexibility and scalability of features and pricing with better business outcomes, enhanced competitive edge, and boosted revenue. The cloud revolutionized how companies purchase software licenses, and most companies now focus on SaaS applications. On-premise applications are now rarely utilized, and this is likely to continue.

The issues occur when too many SaaS solutions are purchased, as the cloud infrastructure becomes less managed. A SaaS optimization  platform is needed to optimize SaaS spend strategies, reducing financial waste.

The most significant reasons for wasted money on SaaS and cloud services are:

• Unclear ownership.
• Automatic renewals of unused licenses.
• The lack of visibility of overlapping SaaS subscriptions.

These issues occur because of a lack of policy on SaaS application procurement, leading to companies paying fees for tools with the same purpose or ones they no longer use.

SaaS spend optimization helps organizations track which subscriptions they own and use, but in what other ways is this crucial for business?

Why SaaS Spend Optimization Is Crucial

Without SaaS spend optimization, companies waste enormous amounts of capital in over and under-subscribed and unused SaaS solutions. Using technology value optimization to define the values of currently utilized technologies and manage them efficiently is key to optimizing resources.

Reduce costs

Companies can save vast resources by optimizing licenses and accounts efficiently when they carry out spend optimization. The main reason companies implement SaaS spend optimization is to reduce their costs. When you set the right processes in motion, you can control and manage your software spending as you see where companies create waste within unused licenses and underutilized or unused apps.

Establish priorities

Success is defined by understanding what software you use, how you use it, and what needs it fulfils. This feedback supports prioritization plans as you review the benefits of tools you use against new tools. Reports and spend tracking allow your company to see how much is spent by collecting usage data of the apps and services you use.

Boost productivity

Eliminating duplicate software helps your employees get the most out of their digital tools by increasing the efficiency of workflows via actions that streamline spending. A company-wide meeting must take place to discuss business needs and if the current software serves these needs optimally. Organizations benefit from monitoring employee digital adoption rates and encouraging cross-departmental collaboration to share skills and learning. All of these actions boost employee productivity and efficiency via cost reduction.

Minimize security risks

SaaS optimization  allows IT team members to add or remove software users based on role to reduce security risks and unnecessary access and lower costs. Complete visibility of all SaaS spending and licenses allows you to track employees’ subscription habits. This action makes it clear when employees are using apps when they shouldn’t be using them.

These are the many reasons SaaS spend optimization is crucial. But how can your company create a strategy to implement all of these critical features?

10 Strategies To Optimize Your SaaS Expenditure

There are many ways of achieving SaaS optimization for your SaaS expenditure. Here are the best ten strategies to ensure you are doing everything possible to approach SaaS spend optimization most effectively and efficiently.

1. Make your SaaS stack visible

The visibility of the SaaS stack is essential to the SaaS spend optimization process. You can achieve this by taking stock and making an expenditure inventory, including all expenses, contracts, and the number of licenses your company has. Doing so allows your business to see what they are using and why. This action supports decisions on future optimizations.

2. Regularly take stock

Take stock of your SaaS usage to optimize the SaaS spend. The needs of large businesses with various software and subscriptions will change often. Monthly audits ensure the company is utilizing all SaaS applications effectively and remind you to review which are needed.

3. Identify unauthorized applications

Unauthorized apps may not be apps that have been installed without permission but simply software that all carry out similar functions. It can also mean that an employee has unauthorized access. Communication is essential to establish and review who needs access to what software.

The existing users of your company may utilize Google Workspace and store documents on Google Drive. On discovering that an employee has purchased a Dropbox account, you can remove the unauthorized account and consolidate unnecessary SaaS licenses by putting it all on Google Drive. 

This action saves the Dropbox fee for the company, increasing communication as IT or HR lets the employee know of this change and reminds all staff that document storage should be via Google Drive only.

Any security vulnerabilities should be dealt with quickly to mitigate risk, especially for attacks on HR systems that store sensitive employee information. Companies must develop policies to ensure that unauthorized application use is dealt with quickly and securely, with communication at its core.

4. Promote organization-wide adoption of apps and productivity

If an app is helpful for your organization, encourage widespread company-wide adoption by promoting the app adoption on a smaller scale to bring it to the broadest user base. Information is key to informing staff of why the SaaS software is vital to the technology value optimization of the company.

Team champions for specific software can be learning points for staff wanting to know more about the basic or advanced features of new software.

5. Negotiate contractual agreements

Many factors influence your ability to get the best deal from a SaaS provider. Examples include future business, terms, usage, volume, and loyalty. These factors come into play when renewing software subscriptions, touching base with the SaaS apps vendor, and asking about a lower rate.

6. Plan regular subscription adjustments

Create a review and adjustment schedule to ensure you only have the SaaS solutions you need and use. Eliminating unused licenses is at the heart of the SaaS spend optimization  approach, and a schedule is a structured way of effectively cutting waste and optimizing SaaS spending.

7. Integrate workflow automation

SaaS optimization  platforms can establish which licenses are needed for employee accounts, driving account setups with usage patterns and data. Automation ensures the system automatically assigns the correct licenses to the appropriate staff.

8. Regularly collect employee feedback

User analytics are essential to inform SaaS leaders on what apps are helpful and easy to use and reduce efficiency and productivity due to frustration or lack of employee training. Companies must act on this feedback by removing unused paid premium features to drive the business forward using the software budget for essential software features.

9. Make the SaaS application inventory available to employees

Increase SaaS adoption and reduce unwanted user access by making the SaaS application inventory available to employees. Doing so means that employees use accounts properly because the staff knows what apps to use.

10. Plan for future growth

SaaS spending plans must look to the future to ensure that resources are always available to invest in new technologies. Ensure that technology research staff collaborate with the finance team to build a plan for growth and development to make SaaS spending the core of business sustainability and expansion.

Now that we have looked at strategies for SaaS spending, we must consider the business value of these tools.

The Business Value of Software as a Service (SaaS)

Organizations need to assess the business value of a SaaS solution before investing. The factors that affect the business value of SaaS applications are:-

• ARR, which is business size
• Gross margin, or profitability
• Net revenue retention, which represents the product quality
• Growth rate, which is the company’s momentum

Companies use metrics to measure these factors, the first churn.

Churn

• Churn is a crucial metric for investors. Typical SaaS business models depend on a monthly subscription, and the churn metric determines how many subscribers cancel the services purchased, monthly or annually. A simple formula can calculate churn:

(Canceled customers/ total customers from the beginning of the year) x 100

CAC and LTV

• CAC represents the sales and marketing cost of acquiring a new customer. CAC is the customer acquisition costs, and LTV is the lifetime value of the profitability of your SaaS applications business. The CAC formula is:
• (Marketing/ potential new customers)
• LTV shows the average revenue a company can be generated from a customer. When a company’s CAC is half the LTV, it has good potential for growth. Conversely, if the LTV is half the CAC, the metric becomes a minus number, showing a business not to be profitable.
• Growth potential exists when the formula’s (LTV-CAC) outcome is positive.

MRR vs. ARR

• MMR is a company’s monthly recurring revenue which shows the revenue of a SaaS business over a specific month on a recurring schedule. ARR is the annual recurring revenue, offering the same amount over a year.
• Investors can be interested in MRR more than ARR because it can more accurately predict future income. ARR could be considered a less reliable metric for predictions as many market disruptions, such as new competition and regulations, can happen in twelve months.
• However, some investors believe that ARR presents a broader revenue perspective, with a more accurate and comprehensive view of a SaaS company’s present and future health. ARR is best suited to companies with seasonal subscription models.

These are examples of how companies can measure the business value of a service, but what SaaS optimization software is available that fulfills specific needs?

Software Solutions For Optimal SaaS Expenditure 

Looking at the highest-rated SaaS applications to get the best software for your needs is the most effective way of procuring the most appropriate and highest-value solutions.

SaaS Cost Optimization

Airbase

Airbase is a comprehensive spend optimization  platform that scales as companies grow from startups to large enterprises.

Airbase’s market segment is 83% mid-market and 15% small-business units.

Mesh Payments

Mesh is an all-in-one spend optimization  platform that offers total visibility and control of every transaction to help you optimize your SaaS spending.

Mesh’s market segment is 61% mid-market and 38% small business.

Vendr

Vendr is an intuitive SaaS buying platform that seeks to change how companies find, buy and manage SaaS solutions.

Vendr’s market segment is 63% mid-market and 23% small business.

SaaS Apps Support

Help Scout

Help Scout platform offers multi-channel support for customers and businesses. It provides a shared team inbox, knowledge base capabilities with Google Docs, a self-service employee portal, and a real-time live chat feature with Beacon integration.

Help Scout market segment is smaller or growing companies.

Zoho Desk

Zoho makes Zoho Desk, a large company is known for its CRM software, which also makes support platforms. Zoho Desk offers features like a shared inbox, phone integration, and chat. Some features like chat are only available with the higher tier option.

Zoho Desk offers a free trial version.

Kayako

The company developed Kayako in 2001 as a highly intuitive help desk ticketing system, but it has continued to expand. Users can offer support across several communication channels, like chat and self-service support. However, these features are available with higher-tier plans only.

The vendor designed Kayako for larger companies.

Key SaaS Applications

Salesforce

Salesforce is a SaaS-only company and has a single flagship platform. The company adjusts the package to companies based on their needs and company size and type, for example, consumer products, education, or financial services.

Salesforce SaaS software caters to all market segments as the company adjusts the software based on requirements. B2C Companies often utilize software this vendor provides, such as banks and other CPG organizations.

Google

Google is known for its leading browser and many other web products, but it is not a SaaS-only vendor. Google is known chiefly for SaaS-based productivity apps alongside the Google marketing and optimization  platform. Google offers infrastructure products like Google Cloud and the Kubernetes engine and free apps like Google search. Older products like G-suite have been rebranded as Google Workspace, presenting it as a seamless SaaS product instead of grouping unrelated tools.

Google products are perfect for SMEs and developers who seek to build products within the cloud.

Microsoft

Microsoft now offers SaaS services after its successes in being the most popular operating system and providing Office suite software. Microsoft now offers their previously license-based productivity apps within the Microsoft 365 package of SaaS tools. This suite includes well-known apps like Word, PowerPoint, Outlook, and Excel and web-native SaaS solutions such as Teams and SharePoint.

Microsoft 365 suite is very diverse, as it is equally helpful for individuals and users in large enterprises. Microsoft SaaS is ideal for companies with existing infrastructure built around Microsoft tools.

Once you have selected a software solution to optimize your SaaS spend, it’s essential to look at best practices to ensure you get the most out of the SaaS apps.

Best Practices To Optimize SaaS Expenditure

There are three primary best practices to ensure your SaaS spend is optimized, beginning with complete visibility of your apps.

Complete Visibility Of Your App Portfolio

Create a clear visualization of all your app subscriptions, user licenses, SaaS costs, and contracts. Ensure that all apps managed or unmanaged by the IT department are included so an incomplete picture of app usage does not create that waste. When you achieve high visibility of your app matrix, you can make better-informed decisions about cancellations, future investments, and renewals. Doing so allows you to optimize your SaaS spend, increasing SaaS ROI.

Identify Your SaaS Owners

Ensure that the owner of the SaaS solution, the person responsible for procurement, is known to finance and IT for queries regarding renewal or cancellation. Companies must assign ownership to each app due to the high amount of apps that companies procure in today’s rapidly changing market. Knowing the app owner allows companies to act on optimization opportunities that present themselves as part of the process.

Monitor Your SaaS Usage

Automating SaaS adoption and usage is essential for efficiency and eliminating human error, as staff can miss schedules to monitor, review and act on usage rates. Companies must use metrics to measure app adoption and usage rates. They can use these data to generate analytics to inform future decisions about which SaaS apps they must renew for a particular subscription and which they should terminate to reduce costs.

When companies follow these best practices, it is no surprise that they can benefit from SaaS spend optimization . But how much investment goes into the SaaS portfolio for companies globally?

How Much Do Businesses Spend on SaaS?

Investment in SaaS increases yearly due to the flexibility of features, updates, and pricing, reflecting the rapidly changing needs of the tech business market. Statista predicts that SaaS spending will increase to $208.1 billion in 2023. And based on Flexera’s 2021 report, Workday, Google, ServiceNow, and Salesforce are the largest providers of SaaS, with Microsoft taking the largest share of 47%.

Flexera also reports that the leading spend optimization challenges companies faced in 2022 were too many processes (49%), increased vendor prices (59%), and maintaining spend efficiency (55%).

These percentages show how many companies felt that these challenges were somewhat of a challenge. Vendors must take note of these statistics to ensure that they provide competitive products at acceptable prices to remain sustainable. Companies using SaaS apps can learn from these statistics in prioritizing their SaaS optimization  choices from these statistics.

SaaS apps are already used for nearly every business function, so what trends will emerge next year as SaaS utilization increases?

What 6 Emerging SaaS Trends Will We See In 2023?

With the rapidly progressing technology of SaaS, we will be seeing some significant changes over the next few years. The first of these involves Vertical SaaS.

1. Vertical SaaS

Vertical SaaS is a targeted solution for certain supply chains and industries. This form of SaaS will become more prominent as organizations try to find more specialized solutions that demand fewer resources.

Because vertical SaaS is industry-specific, it allows the service to provide a higher quality of embedded customer intelligence. Other features include predefined KPIs and metrics, improved data governance, and boosted business value.

2. AI

Artificial Intelligence (AI) is becoming more widely utilized in many fields, especially business, as PwC predicts it will contribute $15.7 trillion to the global economy by 2030. So what part does AI have in SaaS?

AI is one of the major disruptors within the SaaS market for several reasons. SaaS-AI integration allows companies to personalize and automate services better, collect more insights from their data, and boost process efficiency, allowing staff to focus on more complex tasks.

3. Capabilities For Integration

SaaS products today include integration to prevent users from expanding their SaaS portfolio with an excessive number of third-party apps. This trend will likely continue into 2023 as SaaS vendors prioritize integration when updating existing software solutions and designing new ones.

4. Pricing Changes

Studies show that nearly every SaaS business noticed positive results when they changed their pricing plans. In the past, SaaS companies offered flexible pricing based on their business model. Today, factors like the rapid progress of SaaS, industry saturation, and increasingly challenging competition are forcing SaaS providers to transform their pricing models based on the needs of customers or clients.

In 2023, SaaS vendors will likely offer more diverse pricing plans for different companies. Vendors base these plans on usage, where companies are charged based on usage only when they use the service, based on what value the consumer thinks the product is worth or the number of registered users.

5. Branding And Thought Leadership

Today, SaaS companies focus less on the technical product and more on thought-provoking, creative content. This content’s forms include interactive applications, eBooks, landing pages, blog content, and videos.

Today’s SaaS audiences seek to be educated and inspired, and SaaS vendors must fulfill this need to maintain competitiveness. Vendors need to be an appealing and dynamic source to continue to attract customers. Organizations need to adopt the same approach to branding. Companies must establish a mission, define values and develop inspirational visual media to differentiate themselves from competitors and prove to audiences that they understand their needs.

6. Re-Disruptors

SaaS companies must maintain an agile workforce that utilizes the newest tools to move with the changing market. ClickUp is one example of a surprising success story that sprung out of nowhere to take on large companies like Basecamp, Trello, and Asana by offering the highest number of online features for collaboration in one solution.

SaaS Spend Optimization Is The Key To Growth

To optimize their spending on SaaS-based products, businesses can utilize SaaS optimization  tools that help them identify waste areas and create cost savings. This allows companies to builddigital resilience when expanding into new markets and increasing customer satisfaction through increased marketing campaigns while optimizing resources. 

The post SaaS Spend Optimization: The Essential Handbook appeared first on Digital Adoption.

Digital transformation is one of the most important aspects of technology rationalization. This involves leveraging new technologies to improve existing processes, drive innovation in business models, and enhance customer engagement. 

But how do we define and measure technology rationalization? What needs does it fulfill? What are the obstacles to achieving technology rationalization, and what is the six-step process to achieving it? We will answer all these questions, beginning with a definition.

What Is Technology Rationalization?

Technology rationalization, shortened to tech-rat, can also be referred to as Application Portfolio Rationalization or IT Portfolio Rationalization and is part of digital transformation strategies. It is the process of minimizing an enterprise’s technology application stack to minimize costs, increase efficiency, optimize business processes, and keep the total cost of ownership (TCO) low as part of a technology-driven organization.

This definition explains technology rationalization projects. But why are they crucial to business processes?

Understanding The Need For Technology Rationalization

Technology rationalization is analyzing and evaluating your company’s various applications and services to identify the ones that provide the biggest value to your business. This involves assessing each application’s impact on your company’s performance, functionality, and other factors such as ease of use, integration with other systems, cost efficiency, security requirements, and customer satisfaction.

Most companies today use too many applications that reach beyond their needs and do not utilize the savings they could achieve via an application portfolio strategy. Gartner reports that More than 50% of organizations don’t have clear measures of success assigned to their cost management initiatives.

Companies must understand the need for technology rationalization as the first step to building a plan for ensuring they use technology efficiently. The first aspects of this process are shadowed IT and siloed purchases.

Shadow IT And Siloed Purchasing

Shadow IT is any unauthorized use of IT technologies, solutions, services, projects, and infrastructure. When companies take a siloed approach, they ensure that they only give access to staff who need to use specific software for their business operations. This action provides accurate usage figures, informing the best decisions for technology rationalization projects. These steps ensure that the amount of software staff use is always within the necessary levels as the right staff uses the right software.

Mergers & Acquisitions (M&A) Overlap

Organizations can save money by ensuring that technology with the same purpose resulting from M&A from different vendors doesn’t promote overlapping functionality. The way to avoid this is to ensure that when M&As occur, the technology rationalization effort includes a plan to review technology to identify applications with overlapping functionality and remove them to improve efficiency.

Consolidating new tool stacks acquired from M&S to an existing application portfolio can take up to five years or more. It’s essential to plan and be practical when engaging in M&A about application portfolio management as part of a rationalization project.

Unbridled Complexity

Unbridled complexity occurs when too many software solutions have similar or overlapping functions due to poor application portfolio management. This complexity reduces visibility, making it harder to see redundant applications and function overlap. Introducing a more simple perspective increases visibility, improving application portfolio management efficiency.

Fear of Past Failures

Technology rationalization projects are all about learning and evolving based on past mistakes. A culture of accepted mistakes helps to push boundaries and take a more innovative approach to new error practices, being an acknowledged part of a technology rationalization project.

Inaccurate Total Cost of Ownership (TCO) Calculations

Every successful application rationalization initiative depends on calculations to determine TCO, which goes beyond the purchase cost, containing a complex matrix of factors. The most straightforward formula to determine TCO includes three elements:-

• Initial cost (I)
• Maintenance cost (M)
• Remaining costs (R)

TCO = I + M – R

The initial cost considers the initial price you pay for an asset.

The maintenance cost involves the costs to run the technology as a continuous process in the long term.

The remaining cost is what the asset will be worth, for example, five years into the future, helping us make a long-term calculation and better plan for potential devaluation.

When you calculate TCO accurately, you improve efficiency as part of your technology rationalization project.

Redundant And Dormant Apps

Identification and removal of redundant, dormant, or zombie apps are at the core of successful technology rationalization strategies. Companies must perform this task regularly and review it at intervals.

These aspects of a technology rationalization project highlight the need to increase efficiency and optimize the budget. But what obstacles do companies need to be aware of as they begin strategically identifying business applications?

Technology Application Rationalization Obstacles

WalkMe indicates in its report, The State of Digital Adoption 2022-2023, that in 2021 companies incurred costs of $100 million due to technological waste. Looking at each obstacle thoroughly provides the best technology application rationalization strategy solutions. The first of these obstacles is oversaturated portfolios.

Oversaturated Portfolios 

When an application portfolio is bloated with unnecessary apps, it causes hidden redundancy and locks innovation spending to legacy apps. Therefore, reducing the number of applications is essential to success, as usage and investment outliers are easier to spot in a reduced-size app portfolio. With fewer applications overall, there is also more scrutiny on assessing the business value of new ones.

Redundant Platform Changes

Although it’s a sound IT strategy to increase your SaaS footprint and remove perpetual licenses, transferring all applications from one platform to another without assessing their business value is wasteful. Moving fewer apps involves less technical work overall, allowing time to focus on delivering a portfolio that provides real value to the enterprise.

Under-Utilized Applications

Despite it being easier to buy something new, this approach goes against the purpose of application rationalization initiatives. Organizations that see success with app rate strategies get more out of existing apps before they add anything else to the portfolio.

Low Engagement 

If your partners meet initiatives with disinterest, it may be due to a need for more dialogue surrounding the total cost of ownership (TCO) of applications. While this number is difficult to agree upon, it’s vital to have a conversation based on factual information. You will lose accuracy in translation if your assumptions appear too simple or overly complicated. Successful engagement occurs when you find the perfect balance between these two extremes.

It is good to begin where business stakeholders and Infrastructure and Operations (I&O) managers are already aware of issues with certain key areas in their portfolio. An app TCO initiative does not need to be all-encompassing to drive engagement, but you must address areas that staff has already flagged as an issue.

IT managers and CIOs must know these obstacles to ensure they are tackled early for the most successful technology rationalization plans. But what stepped processes exist to guide technology rationalization in a structured way?

The 6-Step Process Application Rationalization Framework

The six-step application rationalization framework combines six steps to allow any IT department to ensure its vision has a solid strategic direction using all the best principles. The first step involves organizational needs and preparedness.

IT Asset Management (ITAM) is a crucial part of the technology rationalization process because it allows users to track their equipment’s usage and performance for decision-making purposes.

Before exploring the process application rationalization framework, it’s worth familiarizing yourself with IT asset management best practices, a set of rules that help to improve the efficiency and performance of an IT Asset Management tool. By following these best practices, teams can meet their goals more effectively and complete tasks faster.

Step 1: Assess Organizational Needs And Preparedness 

The first step in the application rationalization framework is a portfolio assessment to identify all the applications needing review, along with their names and application managers. Sometimes an initiative like this will focus on removing retired apps from the portfolio within two quarters. Still, it’s also essential to baseline assess the entire portfolio so you can find any misidentified apps.

To ensure the success of an app rating, business stakeholders must engage early on by helping with portfolio analysis. Doing so gives the context and validation needed to make accurate recommendations. Only two pieces of data are presented to IT finance – an application list and an app-to-server mapping file.

If the source data is incorrect, it renders all rationalization initiatives useless. Therefore, I&O owns and must validate the application list data with operational data for a successful outcome. A portfolio assessment pinpoints which applications running on older systems need unique infrastructure, as maintaining these legacy systems drains development funds that you could use to fuel innovation and growth.

1:1 Launch Preparedness Assessment

Setting business value to applications often leads to organizational pushback. To isolate investments in running the business (RTB) versus growing the business (GTB), analyze application costs according to company functions. Unfortunately, such an analysis can establish a contentious environment where GTB is considered the only actual spend.

Part of IT’s responsibilities is to deliver KTLO (Keep The Lights On) capabilities, but there can be resistance to change if organizations see this as a hindrance to innovation. To avoid this, companies should ensure that their IT budget aligns with their business objectives and get buy-in from various stakeholders during the tech-rat process.

A common side effect of an application rationalization effort is a spike in spending. When companies retrain staff to use a new, rationalized application, there are costs associated with technology adoption and implementation. Companies need to consider sources for retraining in addition to the business value. For example, is it worth using our training resources to cover this? You’ll need to answer these questions to make sure the best deal.

1:2 Determine Scope and Requirements

A portion of the application portfolio has the potential to bring tangible business value. The next logical question then becomes: how well is it performing in bringing this desired business value? Successful tech-rat initiatives work to answer this question.

The effectiveness of an application’s business value is determined by how it can streamline or redefine existing processes. While many applications support already existing methods, the critical question when selecting one for your organization is: how well does this app automate a particular business process? Automation should be the primary functional quality you consider when assessing an application.

With an application rationalization initiative, employees can voice their experience with an application. If an application hampers productivity and harms the user’s attitude, it reflects poorly on the business itself. Department managers must discuss quality limitations to weigh them against IT goals.

IT stakeholders may desire to expand different aspects of cloud footprints, such as IaaS (Infrastructure as a Service) or SaaS. Still, if existing solutions are only available locally or on-premises, that might not be feasible due to a lack of support from outdated infrastructure.

If a SaaS offering is unavailable, only the status quo remains, as you haven’t moved forwards or backward. The more difficult choice occurs when options are in the cloud, and you must weigh every possibility. For example, can you assume that an app will be secure if it’s just in the cloud? If the answer is no, since you’re so invested in modernizing your IT strategy and operating on Cloud, would you heavily invest in making sure it sticks to those parameters?

A change in application portfolios requires a shift in hardware. Offering cloud services allows users to utilize pre-existing on-premises servers and storage for other purposes. However, moving infrastructure to the cloud without taking advantage of the leftover capacity on-premises is wasteful.

1:3 Compose a Questionnaire using metrics

Utilize metrics to show the success of your application rationalization initiative. Eventually, you’ll eliminate applications of low business value and become skilled at not including new low-value apps.

IT teams report the success of initiatives by:

• The number of apps that will be retired because of analysis.
• The number of licenses saved from those retired apps.
• Recovered or avoided server and storage assets from those app retirements (these numbers show our decision’s value).
• The percentage of apps that you reduce over time.
• The percentage of apps with overlapping functionality that you reduce.
• The difference in per-instance costs for prod vs. non-prod instances as a percentage.
• The reduction in TCO (total cost of ownership) over time, expressed as a percentage price Leaner infrastructure, results in a lower TCO.

Application rationalization initiatives examine how we’re already spending on applications and provide ways to use that money more efficiently. Technology should serve the business–not the other way around–so it’s essential to review our application portfolios from a business perspective.

Projects may duplicate functionality or have low quality but are high value, for example. Tech-rat initiatives need monthly financial and operational data to be effective. App TCO (Total Cost of Ownership) analytics should be available for anyone who needs them, not just IT people. And most importantly: these decisions should always come back to what will generate the most value for the business overall.

After assessing overall needs and preparedness, you must consolidate each software solution within your application portfolio.

Step 2: Consolidate Application Inventory

The next step of the six-step plan is to take inventory to ensure effective app portfolio management. This action involves recording every app in the portfolio to provide all necessary apps remaining, and you remove all unused apps. The first process for this step is to launch a questionnaire to collect data.

2:1 Launch Questionnaire 

The first step is to launch a questionnaire in a way your company will feel is appealing and will be able to engage. Doing so will allow you to collect the best quality feedback that you can use in later stages. Pulse surveys, detailed surveys at less frequent intervals, and points of contact to receive feedback for each department at effective means of collecting feedback.

2:2 Validate Feedback

When you have collected feedback, record the data and update staff to assure them that you will act on their feedback. Tech validation is a continuous process, and staff should feel included in receiving information relevant to their department and role and decision-making where possible.

2:3 Streamline Application portfolio Procurement

Streamlining your supplier portfolio saves you time and money by requiring fewer orders.

The process begins with analyzing which suppliers you can replace and making a list of the products they supply. By identifying a replacement for just one product, you can easily list all other products offered by that specific distributor.

You can then publish this information into an e-procurement solution, where anyone in your company can order the products with little to no hassle. Taking these extra minutes out of your day is significant cost savings and a simplified ordering process.

Step 3: Assess Business Value And Technical Compatibility 

Assessing the business value, technical quality, and compatibility is critical in completing your tech rationalization project. The first process within this is to compile technical value and compatibility research.

3:1 Compile Technical Value and Compatibility Research 

When analyzing successful apps, it is essential to distinguish between the app’s name and its business value. For example, Trello is a SaaS-based project management software. When defining an app rat initiative, it must be easy to assess the application’s business value.

This action makes it easier to identify capabilities in similar applications that are no longer needed (“We have Trello, but we also have surpluses licenses for Wrike and Nutcache. Let’s agree on one standard and retire the others.”).

3:2 Determine Application Dependencies 

Suppose an organization’s app servers are all in one rationalized location, which negatively affects productivity because it limits I&O availability to only one region’s core business hours. In that case, there may be a business need for redundant capabilities.

Step 4: Determine The Total Cost Of Ownership

It’s crucial to determine the cost of ownership (TCO) as part of the six-step process. Begin by assessing the current state of your TCO process.

4:1 Assess the Current State of the TCO Process

The total cost of ownership (TCO) for an application must consider everything that goes into supporting and delivering it, including the accounting entries for both license costs and indirect infrastructure and operational expenses. To acquire this figure, you need to review the cost outliers. The big question with TCO analysis is always accuracy: How accurate are these numbers?

4:2 Review Cost Outliers

To ensure the success of your app rat initiative, you’ll need to analyze TCO regularly. With cost transparency apps, you can upload monthly operational and financial data for IT finance to study and draw self-serve analytics.

When conducting an application TCO analysis, it’s vital that you keep costs in mind, as well as what drives those costs—this way, you can be allocated project spending accordingly for each application.

Step 5: Score Applications

Pinpoint a fraction of the application portfolio as enhanced business value. The next question then becomes: how efficiently are we delivering this business value? Practical tech-rat projects attend to this question.

5:1 Build a Reliable Scoring Framework

To assess an application’s business value, look at how well it supports existing processes and functionality. An organization might select an application that props up an existing process or uses the app to redefine the process (e.g., sales stages with Salesforce SalesCloud). But what matters is how much automation the application offers.

5:2 Review Scores

Any IT goals that stakeholders want to achieve must scrutinize limitations. There might be a desire to branch out to the cloud more for IaaS and SaaS solutions. Still, if existing solutions can only happen on-prem with older infrastructure support, that’s all possible.

If you can’t find a SaaS offering, you’re left where you started. But if there are options in the cloud, it’s even tougher to decide what to do next. How can you be sure that an app will be secure in the cloud? And if you’re wedded to your IT strategy on the cloud, how much should you invest in modernization?

5:3 Engage Application Owners For Feedback

Employees are more likely to be engaged with the business if they have a say in the company’s applications. By allowing employees to weigh in on their experience with an application, companies can get insights into whether an application is user-friendly and efficient.

Step 6: Restructure Application Placements

The assessment of an app portfolio typically starts with names and owners. However, a more holistic approach that assesses the entire portfolio may uncover issues (like incorrect labeling of retired vs. active apps) that are important to the current initiative. This action also establishes the necessary groundwork for follow-on broader tech-rat initiatives.

Business stakeholders should get involved in app rat initiatives as soon as possible by helping with the portfolio analysis. The only resources an IT Finance department has is an application list and an app-to-server mapping file. This data needs to be put into context and validated.

Recommendations from an application rationalization initiative will be meaningful only if the source data is correct. A successful application rationalization initiative depends on accurate, validated data. Finance doesn’t own this information—I&O does, and we must validate application list data using operational data.”

An application portfolio assessment shows which older systems need unique infrastructure, so you can prioritize development spending to areas that create new value.

6:1 Allocate Applications Based on Application Feedback Metrics

This section of the process’s final step depends on the quality of the collected feedback. Ensure that IT works with each department to set up the staff with training and support to use each application.

6:2 Assess Prospective TCO and Vendor Hosting Options

Assessing the prospective TCO and vendor hosting options allows budgets to be accurate. It is essential to establish vendor issues such as frequency of payment and whether it involves monthly hosting fees only or annual license fees. 

If needed, you must also factor in security, training, and support fees to establish the accurate TCO for an application portfolio.

6:3 Build A Migration and Change Management Strategy

Moving to a new application portfolio management strategy is stressful for staff. A migration and change management strategy ensures that staff feel supported and can give feedback to managers if they struggle to adjust to a new portfolio rationalization process.

10 Crucial Technology Rationalization App Features

Getting the essential features for your technology rationalization application is crucial. 

Here are the best features you need to seek out:

• Billing automation
• Content management
• HR management tools
• Business intelligence (BI)
• Enterprise searching capability
• Customer and call center support
• Email communication for Customer relationship management (CRM)
• Enterprise resource planning (ERP) features
• Project management tools
• Compensation processing

It is essential to ensure your tech rationalization project includes the best software features to get the most out of all your software solutions. But what are the best technology rationalization project apps for 2022?

Top 5 Enterprise Technology Rationalization Apps for 2022

The best enterprise architecture helps you to choose the best technology solutions. Our top five tech rationalization applications show you the best tools to select the best technology. All of these solutions are rated 4.5/5 or higher by Gartner Peer Insights.

1. Snow Software

The Snow Software tech rationalization tool offers a broad view of all on-premises, mobile, data center, and cloud assets under your purview. Use Snow Adoption Tracker to see everything in one place for a quick snapshot of what hardware and software are installed, making it easy to manage cost implications and software compliance risks.

2. Matrix42

Matrix42 has various modules depending on your needs, and much customization is available. Use it to integrate and consolidate data from SCCM and SQL and import data from custom-made asset managers. You can also create new connectors with different solutions.

3. Micro Focus

Micro Focus provides stable and reliable license management software that is also very user-friendly. Micro Focus’s SAM Spider software allows organizations to use only one tool for all license management tasks instead of switching between multiple solutions. The tool sends reminders about the expiration and cancellations of contracts via email, which can be beneficial to help firms reduce their IT spending. Thanks to its ability to store asset, license, and contract data all in one place, it has been an excellent solution for many companies as part of their IT rationalization project.

4. Raynet

RayVentory is a tech rationalization tool many companies use for geographically remote and local devices. With its agentless technology, IT can scan hardware and software devices remotely or through agents at a low cost while maintaining comprehensive reports. Additionally, this allows for detecting unmanaged or disconnected devices as the process removes the need for complex IT infrastructures or data centers.

5. Certrero

Certero Enterprise Premium Edition is the solution to all of your old challenges. With this simple and easy-to-use SaaS solution, any size enterprise can gain clarity and control over IT hardware, software, and business intelligence in no time at all.

Certero’s inventory enables you to make sound decisions with the confidence that comes from knowing all your assets and having access to information about them. Certero provides a modern Single Platform Solution that is convenient and intuitive while delivering measurable business benefits. Features include:-

• IT hardware and software asset management,
• software distribution,
• device and user access control, and
• Automated software recognition.

These examples give some idea of what is available on the market. Always ask vendors if there is a trial version that your team can use for a month to ensure it fits your needs.

What Is Tool Fragmentation?

While you can fix some IT problems, you can only manage others. Tool fragmentation is one of those latter challenges enterprises typically have to learn to deal with — it’s not a problem with a clear solution.

Companies use tech rationalization to combat tool fragmentation. This process is crucial, but even after implementing tech rationalization, most businesses end up fragmented.

For example, many large companies try to streamline their cross-functional team working processes using Microsoft products like email, chat, office applications, and file storage. Nearly every enterprise uses multiple software programs for collaboration, even if they have chosen Microsoft as their primary vendor. This scenario indicates that simply making a directional choice to standardize with one vendor doesn’t guarantee it will happen.

In the IT Ops world, organizations have traditionally aligned themselves with one vendor, such as HP or IBM. However, it is increasingly rare to find a company that uses just one of these vendors for its entire IT operations stack.

Fragmentation vs. Rationalization

With this description of the need to consider fragmentation, the question is, how is fragmentation different from tech rationalization? Fragmentation is the process by which a company’s use of software becomes separated, messy, and no longer joined up and organized. The tech rationalization process aims to bring together and simplify the use of technology by removing redundant applications through well-recorded and regularly reviewed application portfolio management. In this way, fragmentation and rationalization link together.

Streamline Business Processes With Tech Rationalization

Implementing tech rationalization can be daunting, but the potential cost savings are too significant to ignore. Industry leaders have acknowledged the importance of successful application rationalization initiatives in achieving better business outcomes. And taking steps towards rationalizing your company’s technology usage can improve outcomes for IT stakeholders. 

If you’re ready to begin saving money for your business, now is the time to start your tech rationalization plan as part of your digital transformation.

The post The Ultimate Technology Rationalization Plan appeared first on Digital Adoption.

We used Google search data to analyze which digital work tools required the most support to understand and use.

Taking a list of 35 phrases associated with support and pairing each one with the names of 275 of the most popular office apps (almost 10,000 search terms), the below data reveals the top 10 office apps that internet users Google for help with.

1. QuickBooks 

With 68,320 estimated monthly searches, QuickBooks accounting software is the most confusing office tool with approximately 67,710 related monthly searches. The most commonly searched term is ‘QuickBooks customer service, ‘ which is Googled 19,000 times per month in the U.S., making up nine of ten of 21,000 global monthly searches. 

The second most searched team is ‘QuickBooks support,’ which is searched 12,000 times each month in America. Over two-thirds (68%) of all global monthly support-related searches for QuickBooks are made by Americans.

2. Microsoft Excel 

Microsoft Excel is the second most confusing office app in the United States, with approximately 49,490 estimated monthly searches. The most common search is ‘how to use excel,’ which is searched 9,600 times per month in the United States out of 29,000 monthly global searches, meaning the United States makes up a third of all monthly searches for this term.

Americans searching for ‘Excel help’ makes up nearly half (47%) of all global monthly searches for this term, with 3,100 out of 6,500 global monthly searches happening in the U.S. With a total of 221,140 estimated global queries, Microsoft Excel receives the most queries for support out of any other office app, except for the U.S.

3. Shopify

eCommerce platform Shopify is third on the list of most confusing office apps for Americans with 44,720 estimated monthly searches. ‘What is Shopify,’ ‘Shopify customer service, and ‘Shopify support’ are the top most commonly searched terms, with 15,000, 8,400, and 7,800 monthly searches from the U.S, respectively. 

‘Shopify help’ is also a top search, which is Googled 4,700 times in America each month.

4. Salesforce 

Salesforce CRM is Americans’ fourth most confusing office tool, with an estimated 39,420 support-related monthly searches. ‘What is Salesforce’ is Googled around 17,000 times per month in the United States, making up just over a third (36%) of 46,000 global monthly searches for this term. 

5. Square 

Mobile payment company Square is the fifth most confusing for Americans. ‘Square customer service’ is Googled 19,000 times per month in America. ‘What is Square’ and ‘Square support’ are popular search terms, receiving 7,000 and 3,000 searches per month, respectively. 

Almost two-thirds (61%) of all support-related search terms are made from the United States.

6. Microsoft OneDrive 

Microsoft OneDrive is sixth on the list after receiving approximately 26,140 monthly searches. Most searches are due to the term ‘What is OneDrive,’ which receives 14,000 monthly U.S. searches. ‘How to use OneDrive’ is also searched 2,200 times per month. 

‘What is OneDrive used for’ receives 1,100 monthly searches by Americans. Almost half of all searches (49%) come from the U.S.

7. Microsoft Teams 

Communication app Microsoft Teams is the seventh most confusing office app for Americans. There are approximately 23,880 monthly related searches in the U.S. In America, ‘what is Microsoft Teams’ is Googled 6,400 times per month, followed by ‘how to use Microsoft Teams’ with 4,600 monthly searches. 

8. Zoom

Video platform Zoom is Americans’ eighth most confusing office tool, with approximately 36,000 monthly support-related searches. ‘What is Zoom’ and ‘How to Use Zoom’ is the most commonly searched term, with 8,700 and 8,200 monthly searches in the U.S, respectively. ‘Zoom support’ is also searched 4,900 times per month by Americans.  

9. WordPress 

WordPress places ninth on the list of most confusing office apps in America. There are an estimated 24,300 related searches made each month in the U.S. Despite being released almost 20 years ago, ‘What is WordPress’ is the top online search with 8,700 monthly searches in the U.S. 

‘WordPress tutorial’ is the second most commonly searched term, which Americans Google 3,000 times per month. WordPress receives the lowest proportion of U.S-based searches at 21% compared to global volume.    

10. DropBox 

Cloud storage app DropBox rounds off the list at number ten with an estimated 21,730 related searches. ‘What is DropBox’ is searched 10,000 times per month in America, followed by ‘How to use DropBox’, which receives 3,400 searches. 

‘DropBox customer service’ is Googled 2,400 times per month in America. ‘What is DropBox used for’ and ‘DropBox support’ are also top search terms, with both terms being searched 1,500 times every month in the U.S. 

By measuring the volume of support-related queries, we can reveal which apps cause the most confusion for its users. According to this study, QuickBooks is the most confusing app for its users, with almost 70,000 support-related searches per month in the United States alone. 

QuickBooks searches also have the largest volume and share of U.S. traffic out of any app in the top ten, which means that even though it is arguably the most well-established in the country, it receives the highest amount of queries from people that need help and support to understand it. 

These results show that as companies implement Digital Adoption Strategies, their employees must be well supported to ensure that the approach is implemented effectively and brings clear benefits rather than confusion.

The Future of Workplace Productivity: Digital Adoption 

As our workplaces become more digitized, with hybrid or remote working taking off and ‘digital nomadism’ becoming a reality for more and more people, new data reveals the common office apps which cause workers the most confusion and sap the most productivity. 

Digital adoption solutions are becoming core to the future of business and something that businesses absolutely must invest in. These results show that as companies implement digital adoption strategies, their employees must be well supported to ensure that the approach is implemented effectively and brings clear benefits rather than confusion. This opens up a more comprehensive discussion about Digital Adoption in Business and how companies can implement effective and easy-to-use strategies.

Some of the most commonly used office apps are causing a lot of confusion and frustration among workers. Programs like Microsoft Office, Dropbox, Google Drive, and Slack are widely used in offices of all sizes, but many employees struggle to understand how to use them effectively. These apps can be crucial for productivity, collaboration, and communication in the workplace, but they often require a lot of training and support to be used effectively.

Digital Adoption is by far the best answer to this dilemma. With digital adoption solutions, companies can support employees at every step, reducing confusion and frustration and increasing workplace productivity and efficiency.

Digital Adaptation is another important consideration for businesses adopting digital tools and technologies. With the right strategies in place, companies can move towards a more digitized workplace, meeting the demands of the modern workforce and staying competitive in an increasingly digital world. Digital adaptation solutions can help companies implement a successful digital strategy and reach their goals.

Digital adoption is an essential part of any successful business. Companies that want to stay competitive and keep up with the demands of modern workers must invest in effective digital adoption solutions, implementing strategies that will help their employees use their office apps more effectively and efficiently. With the right approach in place, companies can experience clear benefits and see real results from their digital adoption strategies. 

The post The 10 most puzzling office apps, according to Google appeared first on Digital Adoption.

Before choosing software, you need to know the answer to several questions. What exactly is HRM software? Does your organization need it? What benefits does HR management software bring to your organization? And finally, which HRM software package is the best for you? All these questions are answered in detail below, starting with definitions.

What Is HRM Software?

Defining HRM software can be difficult as it fills many different functions, and HRI software can confuse definitions even further. We will begin by differentiating HRIS and HRMS.

HRIS vs. HRM software

Firstly, we must establish the difference between HRMS and HRIS (Human Resources Information System). Human resource management software covers every aspect of HR, whereas HRIS only caters to the information of employees stored on HR systems.

Therefore, HRM software is far broader than HRIS, which offers more basic functions. In addition, HRI software can be included within HRM software, reinforcing that HRMS is more of an umbrella term than HRIS.

HRM Software

HRM software collects together all of the HR management functions of an organization. Many different HR functions are filled by one HRM software package, making it easier for staff to ensure HR staff plan, record, and administer tasks effectively and securely.

HRM software supports HR staff to:

• Develop staff.
• Manage payroll.
• Talent management.
• Store employee data securely.
• Streamline core HR functions.
• Digitize the recruitment process.
• Employee life cycle management.

HRMS reduces the time taken to complete tasks such as payroll management and streamlines performance management systems. Reducing resources improves employee experience for both HR staff and non-HR staff members.

Is It Worth Investing In Human Resource Management Software?

Verified Market Research predicted that the HR management software market will achieve a figure of $33.6 billion by 2026. This figure places the importance of HRM software on the list of digital adoption priorities for companies of any size. But what functions of HRM software reinforce its importance by fulfilling specific business needs?

HRM Software Functions

HRM software falls into many different categories fulfilling a variety of other functions. We will begin with HRIS software.

HRIS Software

Human resources information software is a broad term that includes many different types of HR software and functions. The main uses of HRIS software are to manage employee payroll, store employee data, and support benefits administration. Another essential feature of HRIS is to keep HR staff updated on current regulatory and legal requirements.

Examples include ADP, Workday, and SAP Success Factors. 

Performance Management Tools

Performance management tools are a large part of many HRM software packages. This feature is essential to allow HR teams to quickly and easily record and access employee data on performance management.

This action benefits administration staff by reducing costs, allowing them to focus on tasks that technology cannot automate. Performance management software also allows staff to access online HR software solutions to track their progress, improving employee engagement.

Examples include Saba, BambooHR, and UKG (Formerly Kronos)

Applicant Tracking Systems and Recruitment Process Software

A Gallup study conducted in March 2021 shows that 74% of departing staff said being actively disengaged was their reason for leaving. This statistic shows how short-term employee engagement has tremendous long-term outcomes.

Before HRM software, there was no centralization of different processes in HR departments. One strength of an Applicant Tracking System (ATS) is that it centralizes all the data such as role applied for, contact details, and resume. This centralization reduces the administrative time for HR staff, allowing them to focus on attracting the best talent to their organization.

ATS and recruiting software are very similar in purpose and only differ in staffing scales. Enterprise companies or large agencies use recruiting software constantly, needing large staff intakes. ATS software is more beneficial for smaller companies tracking employee lifecycle information like employment engagement modules. Interview details, onboarding features, job boards, and resume files are parts of any ATS software.

Examples include Jazz HR, BullHorn, and BreezyHR. 

Learning Management Systems

Learning Management Systems (LMS) can also be called eLearning systems. These allow HR and employees to track all of their education with an organization, certifications, skills, and qualifications in one accessible place. They also guide employees to where they can access specific new learning and training software. ERP (Enterprise Resource Planning) and ATS can incorporate learning management systems.

Managers can use a standard LMS to confirm permissions for training, calendars, and budgets to track performance and appraisal metrics. LMS software allows HR staff to avoid data entry by manually inputting learning management data.

Larger companies may build their learning platform, but many opt for pre-made platforms. Although not explicitly designed for the organization’s unique workflows or operational processes, they still allow staff to improve performance and employee skills using expert-led training.

Examples include TalentLMS, SAP Litmos, and Cornerstone. 

Employee Engagement Software

Performance management software supports HR staff with the beginning and end of an employee’s time at a company, while employee engagement software supports the middle section: during employment. This intermediate stage is the employee experience and is essential to keeping staff motivated and satisfied with their role and positive perceptions of their organization.

Feedback is requested weekly or daily to give HR staff their opinions on many subjects of their experience at the organization. HR staff collects the data using surveys, gamification, analytics, and follow-up workflows. Employees can give their views on work priorities, progress in attaining goals, and feelings about benefits and their role in general.

Examples include 15Five, Kudos & Fortay

Your organization can use the above list of categories of HRM software as a guide and an example of the essential role of HRM software in business today. Looking more closely at what HRMS can achieve, we will now explore its benefits.

What Are The Benefits of HRIS and HR Management System Software?

The main benefits to HRMS are centralizing HR tasks and reducing administrative time spent on data entry. We will now explore the benefits of HRMS in more detail, looking at specific areas that this software can advantage your organization.

Hassle-free recruitment process

HRIS software stores all employee data, including general personal data, role and salary history, insurance plans and benefits administration data, banking details, and performance management information. Centralizing this information to one area helps HR make efficient use of their time when supporting staff.

Effective workforce management

It is crucial that companies not only attract but retain top talent. Effective workforce management helps to achieve this goal by tracking employees throughout their journey within an organization. 

Employee management software (EMS) is an effective way to accomplish this. HR applications within HRMS like employee engagement, talent management, and an applicant tracking system support successfully achieving workforce management.

Unlimited file sharing

One of the best ways HRMS benefits administration staff in HR departments is through unlimited file sharing. This feature allows a streamlined way of sharing information between departments for quick and easy access in which paper information recording cannot compete.

Efficiency and productivity

Human error and the time it takes to input data are great reasons to adopt HRMS packages. There are also many other ways in which HR management software packages improve employee productivity and efficiency, allowing staff to focus on more complex tasks not possible to achieve via technology alone.

Cost savings

In the past, HR staff spent much time on manual data entry. The future of widespread HRMS use reduces costs as it is costly for the team to spend much time on repetitive manual tasks efficiently completed by a machine. Automating data entry is one of the most efficient ways of reducing these costs. Utilizing an employee self-service portal is another feature of HRMS which allows staff to support themselves, reducing HR staff time.

Reduced errors

Even the most experienced HR staff make errors during manual tasks, as this is part of being human. In busy periods, burnout can occur, or personal issues, oversight, and exhaustion can contribute to errors. Using automation to input data and other tasks can reduce human error by taking human staff out of the equation altogether. Data is input by digital HR tools, which do not make mistakes.

Regulatory compliance

Today, the legal consequences of not abiding by industry regulations are more significant than ever. HRMS allows up-to-date and accessible information on industry regulations allowing HR staff to ensure their organization is engaging in best practices within legal frameworks at all times.

Attendance monitoring

Attendance monitoring is not about punishing staff for not attending work regularly. Due to health or family reasons, staff can work from home in today’s hybrid-friendly business landscape. This feature allows HR staff to support employees in why they might struggle to get to work. Attendance monitoring can highlight such needs when staff does not do some forward with them themselves.

Simplified benefits administration

There are often many companies involved in the benefits for one member of staff and a variety of other uses for staff in various roles. Placing all these benefits in one HR management software package allows HR staff to quickly adjust and keep track of benefits to ensure the team gets the most of them, improving employee engagement and retention.

Data security

Employee data is the basis for most core hr functions and processes, and HRMS stores employee data in a detailed and comprehensive manner. However, this is not without its vulnerabilities. UKG became the victim of ransomware in 2021, highlighting the importance of data security. This breach compromised the bank details of hundreds of sands of employees. 

It is costly and embarrassing for organizations if this information is stolen or misplaced. Investment is always justified when storing employee data, as organizations must achieve employee data recording safely, minimizing risks with relevant security software.

Improved decision-making

HR departments store and collect information. Surveys are one means of asking staff their views on many aspects of their progress toward goals, benefits, whether the company cares about them, and other factors. HR staff can then use these data to improve HR processes, company image, or performance management processes, fusing efficiency and productivity with staff engagement.

Metrics

HRIS software stores all the essential information about employees. HR staff uses this data to formulate key workforce metrics to inform significant company-wide business decisions. This data includes general information, recruiting data, performance statistics, and many other data types.

How Does HR Management software support the employee lifecycle?

The employee lifecycle involves every part of an employee’s time in an organization from beginning to end. HR managers must be mindful of the employee lifecycle to maximize the efficiency and productivity of specific staff members and team engagement. This engagement is crucial as it determines the quality of employee feedback used for company-wide decisions to improve practices and processes.

What is the employee lifecycle?

The employee lifecycle is a model to separate and analyze the different parts of the process by which employees fit into their company and engage in different ways. The model contains six stages.

1. Attraction

The attraction stage begins when an employee first experiences the company brand. Outstanding HR managers ensure that the best company culture is established, maintained, and showcased to new employees.

It is well known that solid company culture is composed of excellent benefits. If you are unsure what kind of culture you have in your workplace, many different models within the organizational development (OD) conceptual framework can help you do this. Looking at OD models helps HR managers analyze how the staff interacts with each other to promote positive interactions and collaboration to improve outcomes.

Also, consider:

Most staff will know that job and employer review sites such as Indeed or Vault are helpful, but they only scratch the surface. 

New staff will scrutinize equality and diversity policies, mental health support, overtime, sick pay, and work-life balance. The organization will reassure new staff members if these policies and protocols are generous and transparent. Clear and supportive policies and benefits create a positive employee engagement experience straight from the onboarding stage.

2. Recruitment

Whether an HR department achieves recruitment with or without recruiting software tools is a critical stage in the employee lifecycle.

A company’s reputation is determined by how it recruits staff because it shows a lot about how an organization values the staff they bring into their team. Even if an HR team recruits staff in large numbers at once, they can take steps to convey a positive message to the business world about how much an organization will value new staff.

Also, consider:

It’s essential to use multiple platforms when recruiting new staff. Multiple platforms allow your organization to attract different types of staff from various areas of the country, different levels of the market, and across different types of markets. Recruiting from multiple platforms encourages innovation and fresh new ideas.

Detail is also essential in recruitment advertisements. Potential new staff will not know about your generous benefits unless HR staff describes them using the relevant information.

3. Onboarding

There is enormous potential to make the experience of new staff joining your organization an exciting, fun experience with little effort. 

When any staff member begins a new role, they will likely look forward to their new duties as they learn and adapt to a new team and set of tasks. Capitalizing on this can be hugely advantageous in creating an image of your company being an enjoyable place to work in an empowering way.

Also, consider:

Frequently scheduled appraisals give staff continuity. Team managers or HR staff should explain the appraisal system to new employees early in their onboarding to make them aware that reviews are taken seriously in their new organization. 

Appraisals also show staff that even if they struggle with certain areas, managers and the HR department will support them to achieve their potential for themselves and their organization. This action creates an open feedback culture, allowing the company to resolve problems early, improve productivity, and streamline HR processes.

Supporting staff to achieve their potential during the onboarding process helps them develop their path to success. This process allows staff to see strengths and weaknesses to reach their potential in the future. This action also helps align company goals to personal staff goals.

Sharing company values early in the onboarding process helps staff to embed themselves into new teams as they practice the shared values of their new organization.

4. Retention

The most significant risk with staff that has been in a role for an extended period is that their organization no longer values them.

All staff leaves at some point, whether this is through transitioning to a new organization, termination, or retirement. However, established team members often get ignored as HR departments focus on recruiting new talent. 

While new staff brings innovative perspectives, the existing team holds high-level skills and outwardly maintains shared values. Rewarding and recognizing the positive contributions of existing staff is essential to employee retention. It’s also vital to ensure new team members know what to expect from HR when they achieve beyond the basic standards and how HR records it.

Also, consider:

Employee feedback is essential to building a system of employee retention. Feedback allows HR managers to constantly consider whether they need to review retention programs to improve and boost retention.

5. Development

Today, the only viable approach to learning is Continuous Professional Development (CPD). All employers today require awareness of CPD from their employees. 

Organizations must make it clear to new employees that they are aware of the importance of CPD in today’s rapidly changing market. The benefits to both employees and the organization are great, and HR departments can easily incentivize the advantages to employees.

Also, consider:

Promoting a mentor system is an effective and efficient way of sharing information between staff to nurture a culture of collaboration. Reminding all staff that there is no such thing as an embarrassing or poorly judged question is an excellent way to ensure a learning culture thrives. Employers agree, with 47% of businesses using the buddy system in onboarding.

Encouraging staff to learn at every stage of their time in your organization is imperative to promoting CPD from the moment they walk through the door for onboarding. The introduction of CPD on onboarding sets the tone for continuous learning in all activities and feeds into the mentor system as teachers are also effective learners.

Covering costs of extra learning courses is also a practical part of CPD for many reasons. While staff becomes upskilled in specific areas, benefitting the organization, they also have a chance to show willingness, enthusiasm, and autonomy for their learning, role-modeling these qualities to fellow staff.

6. Separation

Saying farewell on their final day is as essential as greeting an employee on their first day. There are many factors to the separation stage of the employee lifecycle involving not just the departing staff member but all the remaining staff.

The separation stage is where departing staff are likely to be the most honest about the company, and a robust offboarding process ensures HR staff record feedback properly. Acting on this feedback maintains a positive image for the company and increases retention as the remaining staff sees positive changes within a dynamic, caring approach toward talent management.

Also, consider:

Staff leaving a company can test how a company maintains its outward ability to support its team. The remaining staff must feel they won’t be negatively impacted by departing employees. If practicable, allowing them to engage in the offboarding process can ease the discomfort of seeing a former colleague leave.

In every sense, it’s best to see the separation stage as an opportunity, not a loss, for the company and the remaining staff. Departing staff leaves with their perceptions of the company they are exiting from, which can be as positive or negative as the former company allows. 

When HR staff conduct offboarding correctly, departing staff are more likely to become brand advocates, speaking highly of their former organization.

A way to maintain a link with former staff is to invite them to certain annual parties. This gesture makes them feel continuously valued despite having left and creates a sense of a postgraduate group of former colleagues whose existing staff will never forget for their contribution. This action may also lead to staff returning if they don’t feel satisfied with their new role elsewhere.

How can HR management software reinforce the employee lifecycle?

The employee lifecycle is at the heart of every aspect of employee management.

This list includes:

• Employee attraction
• Employee recruitment
• Employee development
• Employee retention

HRMS helps structure how HR teams capture feedback, allowing them to use these essential data effectively. Centralizing these data to one package of software streamlines this process, making it easy for HR staff to collate and present the data to senior HR staff and managers from different departments.

Employee feedback is the key to effectively managing the employee lifecycle and can reduce departures and increase retention.

HR Systems: On-Premise Multi-Tool, Or The Cloud?

The two main HR system types are on-premise and the cloud (also known as Software as a Service/ SaaS). Usually, large organizations utilize on-premise HR systems, and small or medium enterprises (SME) companies use the cloud for their HR functions.

On-Premise HR Systems

On-premise HR systems run on physical hardware, making them finite in their scope. Because HR teams store employee data on physical machines, it is held more safely than in the cloud. Onsite teams can conduct maintenance, allowing updates at convenient times. On-premise HR systems support multi-tool functionality, enabling HR teams to use several software applications in one system. These systems are highly customizable, and companies can customize them to their needs by selecting required software modules.

The disadvantages of on-premise systems are long setup times when installing the software on every employee’s computer and extended periods to train staff to use the system. The initial setup can also be costly and time-consuming, as physical infrastructure must be purchased and installed.

Cloud HR Solution

Cloud solutions are perfect for less experienced, smaller companies for many reasons. Firstly, set up is instant, so staff can begin using it immediately, and the training time is almost zero, improving accessibility for users. Cloud HR systems can be of any size and have potentially infinite scalability, with the scalability of price reflecting this.

The drawbacks of cloud HR solutions are minor compared to the disadvantages of on-premise. Cloud solutions include a team for support which comes with the monthly fee, scaled as per the company’s need. The biggest concern is safety, as employee information is stored by the cloud provider, not on machines owned by the company. However, today security has become such a high priority that software is robust for dealing with this issue. That said, safety is lower with a cloud HR solution when compared to on-premise.

SaaS Solutions With Integrated HR Management Software

Many SaaS solutions integrate HR management software to give a seamless experience for HR staff managing employees. The intelligent HR software solution is one example of this. 

The SaaS solution has many advantages, such as instant scalability of scope and cost. Smart HR is the name given to SaaS solutions that include HRMS.

The advantages of smart HR management software are:

• Quick to set up – Cloud solutions need no extra physical machines to function, so HR teams can begin using them hours after registration.
• Integrated agility – Cloud solutions are agile, allowing the quick addition or removal of employees and scaling up to the international level as part of a streamlined process.
• Efficient time usage – No training and barely any setup time allows HR departments to use SaaS HRMS to make the best use of time.
• Avoids downtime – No manual updates
• Automatic updates – All updates are automated, so there is no need to have manual updates on individual systems. Automatic updates mean every HR employee always uses the same SaaS HRMS version.
• High accessibility – It is easy for any staff member to use SaaS HRMS quickly due to the software being ergonomic.
• Faster ROI – Cloud solutions are charged monthly in smaller amounts than on-premise HRMS solutions, meaning a faster return on investment.

These reasons quickly lead to SaaS HRMS becoming a popular solution for HR needs.

Human Resources Information Systems

Human Resources Information Systems (HRIS) is the previous term for HRMS. HRIS packages dealt mainly with core HR functions, workforce management, payroll management, and benefits administration. 

The advantage of this type of HR software solution was that it connected many different types of employee data for easy access and alteration where needed. HRIS and HRMS are sometimes used by HR teams interchangeably, but HRMS is more advanced, providing more extensive features.

Applicant Tracking Systems & Recruiting Software

Recruitment requires vast administration, yet it is an essential part of the basic functionality of large enterprises and SMEs. There are slight differences between recruitment software and applicant tracking systems, but this primarily involves the scale for which HR teams need them.

Recruiting software is better suited to recording hundreds or even thousands of applicants in one period and supporting recruitment as a constant need. Larger enterprise organizations most commonly utilize this software. On the other hand, smaller companies use applicant tracking systems more frequently that have to use the employee lifecycle to monitor performance and CPD.

Whichever type of software a company chooses, deciding on the right recruitment software or applicant tracking system is key to streamlining the recruitment process. When manual tasks such as data entry are automated, HR staff can spend more time recruiting the best talent.

Trends In HR Information Systems For 2022

HR management software is changing, and organizations and companies of all sizes need to remain agile amidst the disruptions these new technologies will bring in the coming years.

HR software solutions

Human Capital Management (HCM) is the term used to describe fully comprehensive cloud HR management software that a business of any size can use due to unlimited scalability. The use of the cloud is likely to become more prevalent in the coming decade. The cloud will likely become more commonplace in HR solutions as the need for scalability increases.

Machine learning and Artificial Intelligence

Machine learning and AI are part of every aspect of a business’s future, including software. AI software is currently developing to assist HR teams in recruiting, onboarding, and managing CPD and offboard staff more quickly and effectively than before AI became integrated into such processes. AI can also automate the frequency and methods the HR team uses to gather feedback using AI-controlled pulse surveys. All of these advantages help HR teams to move from a paper to a digital workflow.

Team management set against talent management

There are massive shifts in the way that teams are perceived. Personalization in team management is becoming more prevalent. However, more companies are also accepting the benefits of shared goals for entire teams and how this can improve outcomes.

Employee engagement is affected dramatically by this approach, as managers and employees interact using different styles of communication and how HR perceives performance management. A Gallup study found that 51% of managers were not engaged. HRMS can help capture such data and improve it.

HR consultancies

Due to their small size, SMEs do not always focus enough on their HR departments to meet their staff’s needs. This deficit can lead to issues with recruiting new staff or even essential HR functions such as compensation management or annual leave recording. Online HR software companies fulfill this need, which can also provide HR services as part of the software package.

HR software vendors become external HR departments for companies, enabling companies to outsource core HR functions. The price is much lower than hiring an HR team, which would be unnecessary for smaller companies, maximizing profits better spent elsewhere to improve efficiency and optimize other processes.

Integrated systems or best of breed?

Most companies are now moving to the cloud or SaaS HR management software. This move can involve using many different HR platforms to support the entire employee lifecycle instead of one comprehensive HRIS package. The higher cost of a complete HRMS package is often an influencing factor, but other considerations lead to using multiple HR platforms.

Installing the HRIS is costly and time-consuming as staff needs to complete training to use it, which can take months or years. But when it is ready for operation, HRIS can centralize all employee information in one accessible digital storage area.

Examples of these types of data include:

• Time tracking
• LMS and eLearning
• Benefits management
• Employee engagement
• Succession management
• Performance management
• Payroll management software

The SaaS subscription model gives much flexibility to organizations that choose it within separate software packages. The flexibility allows changing software providers and using specific software when needed.

Aside from SaaS or complete HRIS packages, companies can utilize an Enterprise Resource Planning (ERP) system. ERP software is often more complex but offers extra features that HRIS does not, such as financial systems and supply chain management.

Branding and company culture

Every one of the six points of the employee lifecycle is affected by a company’s brand and culture. When a company presents a recruitment campaign as a marketing advertisement, and when they present their physical and mental health support programs, recruitment success increases. 

Such actions ensure that the HR team presents an image of positive company culture to potential new candidates as part of company branding. Such mental health support programs also reduce the costs of mental health-related illness and sickness leave.

As a result of increasing benefits standards, HR departments and existing and potential new candidates can expect many more positive, wellbeing promoting practices. These practices will reduce harmful workplace practices, wellness benefits, eLearning, and CPD support.

HRMS Governance 

Governance is a huge part of the HR process as it ensures that practices achieve company results while benefitting as many stakeholders as possible. In business, this involves shareholders, staff, and customers, and HR departments formulate policies to develop policies to define roles and responsibilities for each position in the company.

The best way to see how HRMS can support HR governance is to split the governance process into its four areas of policy, practice, review, and expertise.

Policy

HR policies are recorded clearly in documentation once senior managers and the board of directors have approved them. Policies must fit in with local laws for labor, ethics, and business practices. HRMS packages often have supporting document management for HR governance policies and an online self-service portal for employees to access documents and record confirmation they have read and understand them as part of onboarding.

Practice

HRMS supports best practice documents with unlimited file sharing and settings where HR teams can set alerts to trigger regularly, ensuring documents are current. HR teams must establish best practice guidelines before they are needed. Often, companies neglect best practice guidelines until they need them during harassment allegations, such as wrongful dismissal. At this point, they realize they did not update them for several years.

Review

Policies must be periodically reviewed or audited to keep them up to date with local laws and transitioning company values. Review can be built into any company culture to ensure documentation and best practices follow current research. ‘HR managers can use environmental scans’ to glance at the current state of HR policies regularly, for example, once a month, to ensure they achieve their aims.

HRMS can assist with regular review needs by using AI for scheduling, allowing HR managers to choose when to schedule an environmental scan or a full review. AI scheduling can help collaborate with the board of directors, senior managers, and departmental managers of relevant departments to discuss changes at every level.

Expertise

The board of directors is the key to ensuring processes operate smoothly in HR governance. The board exists to use the expertise in their field to support staff at different levels to achieve company-wide goals. For this reason, the board should be composed of a diverse team of individuals from different specialisms.

Choosing an HRMS in 2022

Today there are many HRMS options. Researching the best HR software vendors is essential before selecting the right HRMS for your organization. There are a few steps to ensure that the ROI will be quick and that you are selecting the right HRSM for your organization’s needs.

What size is your company?

How many staff does your company employ? Company size is one of the first considerations when choosing an HRMS. A small company can be one to five staff, for which a cloud HRMS with fewer modules and a software vendor-supplied HR service may be best.

When staff in smaller teams complete HR tasks, it usually means one person dealing with all HR tasks alongside tasks for another role. This role allocation can be stressful and reduce employee performance, so outsourcing HR to an external team allows all staff at smaller companies to achieve a higher output in their specialism, increasing employee engagement and improving their experience.

If your organization is large, employing hundreds or thousands of staff, the benefits are greater to installing tailor-made multi-tool HRMS software on every computer. This higher level of HR management software allows the different management layers of large enterprise organizations to be simplified and centralized.

Large companies also need this software because the different staff in HR teams fill different skills and require cohesion via software. All HR professionals, including HR managers, assistants, and recruiters, use varying features of the same HRMS package that streamlines all HR processes, despite individuals holding different responsibilities.

What are the organizational responsibilities?

A small business has similar responsibilities in terms of the essential functions of the team. As a result, this small team dynamic can blur lines between roles as each staff member is often called upon to complete most of the different tasks needed within a multi-skilled workforce. Even if roles do not overlap between team members, each team member in a small team will have multiple roles as part of their established role. The HR manager may also be the finance manager. Or the HR manager may be the assistant to the CEO.

It is important to consider how much pressure is added to individual staff when HR responsibilities are added to their workload, mainly if team managers allocate multiple HR functions to one individual.

A dedicated HR team decides to implement an HRMS contrast starkly from that of a small company. In a larger organization, HR managers assign a team of staff with specialized HR roles. This arrangement can result in better support for HR staff as they work with many other individuals, often with much experience in their field—this configuration results in improvements to individual and team engagement, employee experience, and increasing output.

What resources do you manage?

Smaller companies have lower revenue and fewer resources than large enterprises. Lower revenue means fewer resources to spend on training and dedicated learning management systems. However, training still needs to occur. Managers must consider the employee lifecycle for CPD and individual growth but approach it differently.

A cloud HRMS with an outsourced HR support team available and paid for on demand is ideal for smaller teams to fulfill their needs without impacting too heavily on limited budgetary resources. There are also other ways smaller companies can develop staff on a smaller budget.

Mentors can improve morale and fill knowledge gaps in a personalized, face-to-face manner. Mentoring can also feel less formal and more person-centered than traditional training programs completed using technology. Mentors are usually low-cost, or managers can even source them voluntarily.

Larger enterprise companies have far greater resources than SMEs. However, despite resources existing for purchasing HRMS infrastructure, HR staff needs to calculate ROI so that decisions for HRMS always make sense and lead to long-term gain.

Time is another resource to consider for larger enterprises. How long will it take staff to learn how to use a custom-built HRMS installed on each computer compared to a cloud SaaS version? CEOs should not assume that larger companies need massive investment into the most expensive HRMS. Senior and HR managers should discuss competitors’ analytics and use them when considering the best HRMS for any sized company.

What are your company’s recruitment needs?

The size of your company will influence how you recruit staff. Larger companies might pay agencies or have dedicated recruiting software, whereas smaller companies are more likely to utilize social media to attract talent. The main differences are that HR teams are in-house in larger companies and may be external in SMEs. It is easier to recruit staff internally when you have a large population to work with, which is not a luxury afforded by SMEs.

Smaller companies may not need recruitment software, as there are many other ways of recruiting. LinkedIn and employee referrals are less expensive ways to recruit new employees. Larger enterprises may consider recruitment modules if opting for an extensive and comprehensive HRMS package.

How do all these questions translate into HRMS features?

When you have established your company’s size, resources, responsibilities, and recruitment needs, it is time to consider what features will be needed to fulfill your needs. The employee self-service portal feature is a significant draw for larger enterprises, but this may be entirely unnecessary for SMEs. A smaller company may favor mobile compatibility for cloud support, whereas a larger organization may benefit from on-premise HRMS.

It’s essential to consider which features are most important to achieve your daily KPIs, whatever your business needs.

Top Five HRM Vendors

Different vendors offer different features. Some HRM suites such as SAP have good functionality across ATS, recruiting, employee engagement, and payroll, and some specialize in one such as payroll for Oracle or Zenefits. We have provided a guide below to support you in selecting the best HRMS vendor for your company.

Workday

• Deployment: Cloud
• Company Size: Medium/ Large
• Features Offered: Employee lifecycle, benefits, payroll,

UKG Pro

• Deployment: Cloud/ On-premise
• Company Size: Medium/ Large
• Features: Payroll, benefits, recruiting, onboarding

Zoho People

• Deployment: Cloud
• Company Size: Small/ Medium/ Large
• Features: Performance management, time and attendance management, expense reporting.

Oracle

• Deployment: Cloud/ On-premise
• Company Size: Medium/ Large
• Features: Talent management, workforce management, AI

SAP SuccessFactors

• Deployment: Cloud
• Company Size: Medium/ Large
• Features: Basic HR functions, AI, machine learning, consulting services

There are over a hundred HRM software vendors today, so HR managers and senior managers must liaise to research the best hr software solutions for their company.

Metrics: The Key To HRMS Success

Much like any other aspect of business, HR teams measure success using metrics. HRM can calculate these metrics more easily, automating analytics processes via AI. HR teams can then use these to measure the successes or shortcomings of an HR department.

HR teams use two terms to categorize HR analytics; people analytics and workforce analytics. People analytics are insights drawn from data about people who work in an organization, such as employees and customers. Workforce analytics include the people in an organization and all non-human factors contributing to company output. Examples are chatbots, automated process analysis, and third parties such as service providers.

How Are Metrics Used In HR?

HR teams need to align a company’s corporate strategy with HR indicators. Metrics collect data to draw insights (analytics) about the financial and the human staff as resources within a company and the impact of their psychology on the organization.

Metrics help senior managers to make decisions by measuring:

• Primary HR costs: recruitment costs, work absence %, and other factors that HR supports.
• Assess HR processes performance to maintain continuous improvement, such as employee experience
• Record ROI on HR processes such as training and follow-up procedures

HRM can help use metrics to draw analytics from them. HRM can also make all of these actions not only easier to conduct and easier to understand. This factor shows it is vital to find an HRM with suitable metrics tools and a UI that you find appealing and accessible to make sense of captured data.

What Are The Keys To Success When Using An HRM?

Indicators created from HR data captured using HRM software must be adapted and presented appropriately for different company departments. The board of directors, the CEO, senior managers, and team managers all require something different from these success indicators. This difference in needs is why these indicators must be produced with each staff type, ensuring the most efficient indicators.

A steering team must guide indicator creation using a range of skills, such as:

• HR competencies
• Statistical skills and data analysis
• Motivation and skills to acquire necessary business skills
• IT skills to appreciate where and how the HR team record data on systems.
• Skills for marketing, such as public speaking and presentation skills, to fully utilize the findings of the result.

HR staff and steering teams must take time and attention to ensure metrics are well crafted to obtain the most current and relevant data. The organization should also decide what metrics will be required and factor this into the choice of HRMS.

When to Purchase an HRMS

Companies of any size should consider purchasing an HRMS to safeguard themselves against future threats.

The first threat is the digital disruption caused by more companies investing in HRMS as part of their digital adoption strategies. Companies must ensure they have invested in HRMS to maintain digital resilience against competitors.

The second is that HRMS improves HR processes, speeding them up by automating data entry and freeing up staff for more demanding tasks. The third advantage of HRMS is that it can support HR governance, recording and regularly alerting staff to policy audits and providing updated policy information informed by local labor laws.

An HRMS should be purchased by senior and HR managers as soon as practicable for companies of any size as part of an enterprise transformation strategy. Whether this is a cloud HRMS for a small company or an on-premise multi-tool option for large enterprises, an HRM is essential for today’s HR needs. But HRMS contain huge amounts of employee information that needs to be stored securely. This stage is where managers need to consider HRMS security.

HRMS Security

Employee information is very sensitive and attracts criminals conducting ransomware operations. Ransomware is one of many threats to attack and steal employee information from HRM and HRIS systems. Security measures are needed to counter these threats.

Data Security and Privacy Controls

IT and HR managers need to take many security actions to boost HRIS and HRM security, such as encryption software, Virtual Private Networks (VPN), and hiring in-house cyber security staff or employing them temporarily for regular reviews. Today, 98% of staff use mobile devices daily for work, highlighting the need for mobile security provided by a VPN. For companies with smaller budgets, all staff can be made responsible for security using basic measures.

Managers can train staff to be aware of the dangers of cyber threats and the need to change passwords regularly and limit access to company intranets via the online HR software self-service portal. Managers can also emphasize the need to lock doors, windows, or rooms containing sensitive paper documents. 

Security concerns vary between company size and type. Large companies can be more vulnerable as they are more well-known and visible, with more to lose in terms of financial assets and higher-paid staff. These companies may store more data on-premises in physical forms but also have a more extensive hybrid workforce, increasing vulnerabilities. 

However, this is vulnerable to being physically stolen, so it can be secured to desks or cupboards when staff is not accessing computer equipment. Smaller companies are more likely to use the cloud for HRM solutions, which means entrusting their data to a third party. Therefore, for any company, there are always security risks and the need to protect information.

Employee Data Management

Extensive personal employee information, such as performance management data and bank details, is private and considered sensitive. Employers can avoid asking for specific information if an applicant has not yet been hired, such as social security details. Limiting information stored is a simple but effective way to prevent it from falling into criminal ownership.

Employee Self-Service Portal

Employees accessing HR online via a self-service portal from home can create a security risk if HR teams do not use VPN. HR teams must ensure all employees are aware of the need for a VPN, preferably an approved, paid version offered by the organization. Managers can present the incentive to use the VPN to staff as an action to protect their sensitive information such as address, income, and bank details.

Managing Payroll Data

Bank details are sensitive information. The organization must keep them safe and secure. HR teams must use up-to-date, best-in-class encryption software when storing payroll data, as the loss of this data can be catastrophic for the reputation and finances of any organization.

Price Guide

Prices can vary between HRMS, but vendors usually advertise them per employee or user. Larger companies are charged more due to a higher number of employees, but the upfront cost is not the only factor to consider. Cloud HRMS packages do not require extra servers and therefore do not increase running and maintenance costs like on-premise HRM packages. However, cloud options do not usually offer the same security or comprehensive functionality as on-premise options.

A few pricing questions to ask yourself before deciding on an HRM are:

• Do you need a basic or advanced HRM, and how does this fit your budget?
• Do you need scalable or flexible software based on your organization’s future needs?
• How well will the new HRM work alongside any existing HR software?
• Have you included long-term costs of cloud versus on-premise HRMS into your budget?

Once you have answered these questions, you can research the best prices for what you need. Zenefits is priced from $8 per employee per month to $3,500, depending on the features you decide to use. Prices can vary for an HRMS.

HRM Pricing Ranges

HRM software usually involves a monthly fee rather than an annual license. There are three tiers of price measured per employee per month.

These tiers go from Basic to Premium and Advanced:

• Basic: $3-$1,239
• Premium: $293-$3,500
• Advanced: $688-$3,500+

Depending on the organization’s features, prices range from $3 per employee per month to more than $3,500.

Pricing Examples With Features

These breakdowns show the pricing tiers of five frequently used human resource management software examples. We have based this pricing on advertised prices from January 2022.

BambooHR

• Basic: $5-$495
• Premium: $834-$2,063
• Advanced: $2,063+

Eddy

• Basic: $57-$849
• Premium: $857-$2,049
• Advanced: $2,049

Employee Navigator

• Basic: $445
• Premium: $545
• Advanced: $755-$2,100+

Fingercheck

• Basic: $47-$839
• Premium: $847-$2,039
• Advanced: $2,039+

Gusto

• Basic: $51-$1,239
• Premium: $1.361-$3,039
• Advanced: $3,039+

Each of these HRM software vendors offers free quotes on their respective websites to give an idea of the features that vendors offer with each service tier. But aside from the HRM software fees, managers deciding on an HRMS must consider other costs before signing up for a monthly HRMS subscription.

Types Of License

HRM software vendors offer three different types of licenses, so organizations need to be aware of the differences to budget accordingly. The most common license that larger companies will encounter is the perpetual license.

Perpetual License

HRMS on-premise usually has a perpetual license because companies store their data on their physical server hardware. Organizations only need to pay for the cost of the software.

However, there may be an ongoing fee or annual support fees if this service is required, as well as costs for additional software modules which add features. Organizations should invest in perpetual license software after a free trial to confirm that the software is what the company needs. 

If the size of your company exceeds 500 staff, it is a good idea to choose an annual plan as there are discounts for yearly payments.

Subscription License

The subscription license is also called SaaS and involves the vendor using the cloud to host the software and a company’s employee data on their servers. Subscription licenses usually require annual or, more commonly, monthly fees. Vendors design pricing as flexible as possible, whether the price for each period is monthly, twice-yearly, or annually. This flexibility allows quick and easy customization, adding or removing modules, or scaling up or down accordingly.

The difference between the user and employee price is highly significant for this license type. Vendors define the price per employee as the number of people using the software to carry out their daily HR tasks. Price per user includes any employees using the online self-service portal to access features of the HRM, adding to the cost. It is essential to be aware of this difference to avoid overlooked fees.

Free and Open Source License

Free and open source licenses are the least common as vendors cannot monetize them easily. These licenses are applied to free software, ideal for smaller businesses that do not need and may not be able to afford an HRMS with a perpetual or subscription license. Free and open source licensed HRMS offers basic functionality for free, with additional modules requiring payment.

Hidden Costs

HR managers and senior managers making decisions to purchase an HRMS must be aware of the four hidden costs that managers can easily miss.

• User onboarding
  • Always confirm with a vendor if there are any software training costs.
  • Organizations incur fees when training takes place at the vendor’s facility.
• IT support
  • IT support is essential to ensure service delays do not occur.
  • Double check what kind of IT support the vendor has included in your HRMS and if this fits your company’s needs.
• Data migration
  • When organizations adopt a radical data storage transformation, from a legacy system to cloud storage, data migration can cost extra.
  • Always ask the vendor about data migration fees before agreeing to a contract.
• Maintenance and upgrades
  • Vendors include basic upgrades to the fundamental operation of the software in the license.
  • Vendors often charge advanced maintenance and upgrades, so it’s helpful to find out as much as possible about these extra fees before purchase.

When companies know these hidden costs, it is easier to ensure questions are asked before purchase to ensure that adopting an HRMS doesn’t exceed the budget.

HRMS Is Essential In 2022

Different sized companies have varying needs, but one factor remains a high priority for the HR departments of organizations of any size; the need for centralization. This factor is the most prominent reason companies invest in human resource management software.

HR teams, senior managers, and board directors must decide methodically and consider all factors when selecting an HRM software. Finance or HR teams must ensure budgetary constraints align with required features and pricing considerations, including licensing and often overlooked costs.

When a company chooses the right human resource software, the benefits are far-reaching, affecting most if not all business processes. All HR processes can be improved with human resource software, as HRMS reduces data input times for recruitment and employee data, increases employee engagement, and streamlines all HR processes. For these reasons, the software quickly fulfills its ROI when your organization chooses the right HRMS.

The post HRM Software: A Complete Guide For 2022 appeared first on Digital Adoption.

Cloud cost optimization is a significant challenge for cloud-centric businesses. The pay-as-you-go model of cloud computing can lead to unforeseen costs, which can quickly spiral out of control. Adequate digital adoption solutions and governance practices can help avoid these issues, but they need to be tailored to the specific needs of each organization.

But what is cloud cost optimization? Why is it essential for the modern enterprise scale of business? And what can a brief history of cloud cost optimization tell us about this service today? We will explore these questions, beginning with a definition. 

What Is Cloud Cost Optimization? 

A proactive cloud cost management strategy lowers the number of cloud licenses or apps, preventing waste and security risks. This approach also aids in the reduction of operational costs by identifying underutilized software that companies can optimize for their operations to identify instances of cloud waste.

Cloud services are better for customers than on-premises cloud infrastructure due to the flexibility and scalability of features and pricing, improved business outcomes, enhanced competitive edge, and increased revenue. The cloud revolutionized how organizations buy software licenses, and most firms now focus on cloud applications. On-premises apps are increasingly rarely used today.

The problem with too many cloud solutions is that it creates infrastructure tension. A cloud management strategy can help to lower financial spending by optimizing strategies.

The most significant reasons for wasted cloud resources are:

• Unclear ownership.
• Automatic renewals of unused licenses.
• The lack of visibility of overlapping cloud subscriptions can lead to waste.

These issues occur because of a lack of policy on SaaS application procurement, leading to companies paying fees for tools with the same purpose or ones they no longer use.

SaaS spend optimization helps organizations track which subscriptions they own and use, but in what other ways is this crucial for business?

Why Is Cloud Cost Optimization Essential For Modern Enterprise? 

Without SaaS spend optimization, companies waste enormous amounts of capital in over and under-subscribed and unused SaaS, IaaS, and PaaS solutions. Using technology value optimization to define the values of currently utilized technologies and manage them efficiently is key to optimizing resources.

Reduce costs

When businesses optimize licenses and accounts, they save a lot of resources. When you implement cloud spend optimization, you can control and manage your software expenses as you see where businesses create waste with unused licenses and underutilized or unused applications.

Establish priorities

Understand what software you use, how you use it, and what needs it fills. This information aids in the prioritization of solutions as you compare the benefits of tools you utilize to those of new ones. Reports and expenditure logging help your firm track how much money is spent by gathering usage data from the apps and services you employ.

Boost productivity

You can help your employees make the most of their digital tools by eliminating duplicate software. They’ll work more efficiently because streamlined spending will create better workflows. To see if your company needs new software, hold a meeting to discuss business needs and if the current software meets these requirements satisfactorily.

If you want your organization to be more productive and efficient while saving money, start by monitoring employee digital adoption rates and encouraging cross-departmental collaboration. By sharing skills and learning across departments, employee productivity will increase.

Minimize security risks

Cloud cost management lets IT team members change or delete software users based on the function to minimize security concerns and extra access while lowering costs. Complete insight into all cloud spending and licenses allows you to monitor employees’ app usage. This procedure exposes when workers use applications when they shouldn’t be doing so.

These are the many reasons cloud spend optimization is crucial. But what historical approaches to cloud cost management brought us to today’s cloud marketplace?

A Brief History Of Cloud Cost Optimization 

When software developers saw hundreds of applications migrating to the cloud, they realized companies could manage infrastructure as code more efficiently with robotic process automation (RPA). The AWS Trusted Advisor tool makes cost-saving suggestions to help you run your application in the cloud more effectively.

Developers wrote scripts as needed for essential cloud resource management, but digital process automation allowed organizations to report and take action upon resources much more efficiently. Teams involved in developing early cloud management software ensured there were no unused resources as a priority. They also noted that cost controls would be necessary eventually, so they implemented them early on.

For example, since most companies only utilize development environments during the day, developers allowed the automation capability to shut down and restart resources in bulk at the end of the business day and restart them the next morning.

The capability to report resource properties, usage, and Cloudwatch metrics for resources allows IT staff and team managers to locate and tackle inefficiency and waste. Reviewing the pricing models is now considered the best practice to create savings from hundreds or thousands of cloud resources, which can total millions of dollars over a year.

We will now explore strategies to reduce cloud costs since we understand the background on which cloud optimization occurred.

10 Cloud Cost Optimization Strategies 

These are the ten best strategies to ensure your business goals align with the lowest possible cloud costs. The first is making the cloud technology stack visible to all employees.

1. Make your cloud stack visible

The visibility of the cloud tech stack is essential to the cloud spend optimization process. You can achieve this by taking stock and making an expenditure inventory, including all expenses, contracts, and the number of licenses your company has. Doing so lets your business see their use and each cloud service and app’s purpose and provides data to support decisions on future optimizations.

2. Regularly take stock

To optimize cloud expenditures, consider your current usage and make adjustments. Businesses of all sizes with numerous software and subscriptions have varying demands regularly. Monthly reviews ensure that the firm effectively utilizes all cloud applications and serve as reminders.

3. Identify unauthorized applications

An unauthorized app may be any software that performs the same tasks as authorized apps. It can also imply that an employee has unlawful access. Communication is needed to establish and maintain who has access to software, communication is required.

If you find that an employee has purchased a Dropbox account, you can remove the unauthorized account and consolidate unnecessary SaaS licenses by using only Google Drive. This action is possible because your company’s existing users likely utilize Google Cloud services such as Google Workspace and store documents on Google Drive.

By taking this action, the company saves on Dropbox fees. In addition, communication improves as IT or HR reminds all staff of this change and encourages them to use Google Drive for document storage.

Companies must address security flaws as soon as possible, especially when an organization’s HR systems store sensitive employee data. To reduce risk, companies must establish rules to deal with unauthorized application usage promptly and securely, with communication at its heart.

4. Promote organization-wide adoption of apps and productivity

To ensure that your organization reaps the maximum benefits of a helpful app, promote it on a small scale to get as many people using it as possible. Then, provide employees with information about why cloud software is important for optimizing technology value in the company.

Assigning team champions for specific software may provide staff members a place to go if they want to learn more about the basics or nuances of new software.

5. Negotiate contractual agreements

Many factors influence your ability to get the most valuable deal from a cloud service provider. A few examples are terms, usage, volume, and loyalty. When it comes to software subscription renewals, these elements are essential because they influence whether or not you will receive the same price or the vendor will offer a discount.

6. Optimize Cloud Costs and Pricing Review

Eliminating unused licenses is the best way to optimize your cloud spending, and a review and adjustment schedule will help ensure you only have the cloud solutions you need and use.

7. Integrate workflow automation

Cloud management platforms can ensure that employees have the correct licenses for their accounts by allocating them based on usage patterns and data. Automation ensures that the system automatically assigns the correct permits to new staff members as they join.

8. Regularly collect employee feedback

User analytics indicate which apps are successes and failures. Leaders use this data to stop frustration, wasted time, and low productivity by decreasing or removing features that staff doesn’t use. Companies save money by only paying for what they need.

9. Make the cloud application inventory available to employees

Encourage employees to adopt cloud resources such as SaaS, PaaS, or IaaS by making the cloud application inventory available and reducing user access. When staff members know what specific app to use for their duties, they will be more likely to comply with company protocols.

10. Plan for future cloud growth

Cloud spending plans must create a vision for the future to ensure that resources are always available to invest in new SaaS, IaaS, and PaaS technologies. Successful companies conduct research continuously to invest in new cloud cost optimization tools. Ensure that IT staff collaborate with the finance team to build a plan for growth and development to make spending the core of business sustainability and expansion.

Ensure that IT personnel work with the finance team to create a growth and development plan. This plan will ultimately lead to an optimized cloud bill as a core business sustainability and expansion component.

Software and Automation Needs

Automation is a massive part of many business processes today, and this is especially the case with cloud cost optimization strategies. Automation supports productivity, reliability, and data governance, principles of a successful cloud cost optimization strategy. Cloud cost intelligence is also supported by automation, as a lot of data can be generated faster than staff can create manually.

Automation can help manage hybrid and multi-cloud systems by uniting them under a set of processes, improving scalability, consistency and speed. The financial aspect is the first to automate to control cloud costs.

Financial

By graphing cloud expenditure over time and by expense type as well as a cost center, it is possible to understand trends and create cost savings to reduce the cloud bill. If companies make data and graphs available daily, monthly, and yearly, they create healthy transparency within the organization leading to friendly competition.

By constructing an automated central application development and deployment platform, Ascend Money streamlined operations among different geographical areas. This action also increased consistency and the ability to handle more scale and reduced task completion time by 57%.

Monitoring 

To optimize your resources most effectively, you need metrics for every area of cloud resource utilization versus capacity as part of a robust approach to cloud cost intelligence. Capital One created a tool by factoring in history for “the four corners of utilization metrics”: CPU, memory, disk, and network usage. This system generates instance-type recommendations based on past data and sends alerts if there are unusual spikes in costs or activity levels.

Management, Reporting, and Clean-up

Keep track of everything in your cloud so that nothing goes unused or gets forgotten. By examining the overall composition of your cloud fleet, you can also gain insights into capacity reservations and potential ways to optimize costs further.

Now that we have established the automation capabilities, what are the best practices to ensure the best cloud cost optimization?

20 Best Practises For Cloud Cost Optimization

These twenty best practices will help optimize your cloud spending, beginning with understanding usage patterns to forecast future cloud environment needs.

1. Understand Usage Patterns & Forecast Future Needs

Vendors of cloud services give billing details describing the cost. Leverage these details to identify high-cost areas and save money. Analyze and prioritize high-cost workflows and services. Track and create analytics from usage reports to inform and forecast your future needs.

2. Compare Pricing Models

Communication is vital when sharing information with all relevant parties about costs measured against the type and scale of business requirements. Executives, product leaders, engineering leaders, and other appropriate parties must communicate their needs as part of the best cloud cost optimization practices.

3. Automate Resource Allocation 

Automating resource usage reports makes cloud cost optimization strategies efficient and allows staff to focus on higher-level tasks. Human error can often lead to inaccurate data on usage data of premises infrastructure or the cloud, such as when developers and administrative staff overlook de-provisioning a temporary server after they have provisioned it.

When such instances occur, Azure or AWS reserved cases result in the vendor overcharging the company for resources it no longer utilizes. Best cloud cost optimization practices, such as automated resource allocation, help establish available or unused resources and remove them to reduce unnecessary expenses.

4. Utilize Reserved Instances 

Companies can purchase Reserved instances (RIs) from cloud providers to give significant discounts. When purchasing an RI from a company like Amazon Web Services (AWS), Microsoft Azure Cloud Service, or Google Compute Engine, they offer instance types that suit your needs. In exchange, you pay upfront without being charged monthly fees, unlike other services.

This action results in using fewer resources than expected during any given month, then this money is saved, and there is less strain on their infrastructure.

5. Take Advantage of Discounts & Credits

Cloud vendors often reward loyal customers with discounts or credits. When renewing subscriptions, ask your vendor about a discount if you pay more than one year in advance or if other reduced rates are available.

6. Delete Unused Resources 

An essential aspect of optimizing costs is consolidating unused technology resources and deleting them. Cloud vendors charge for idle resources even when companies do not use them. If your company uses a CPU at 10% of its capacity, consider better utilizing it to save costs, such as merging them across different systems.

Leveraging cloud features such as on-demand options, auto-scaling, and load balancing allow you to scale up capacity when you need.

7. Make An End-To-End Budget

Ensure everyone understands their budgets and objectives for each project, as this is a considerable element in lowering costs. Engineering executives should have talks with CEOs and product leadership to learn about cost needs.

Vendors should base product requirements and features on how they will ultimately be delivered to customers, for example, as part of a free trial or enterprise plan. Companies must reference these requirements during later planning and development stages, alongside other important factors such as speed and resiliency.

8. Implement Complete Visibility Of Your Cloud Software Portfolio

Create a clear visualization of all your app subscriptions, user licenses, SaaS costs, and contracts. Ensure that all apps managed or unmanaged by the IT department are included so an incomplete picture of app usage does not create that waste. When you achieve high visibility of your app matrix, you can make better-informed decisions about cancellations, future investments, and renewals. Doing so allows you to optimize your SaaS spending, increasing SaaS ROI.

9. Identify Idle Resources

Optimizing cloud costs can be as straightforward with a few clicks. It is essential for administrators, developers, or anyone responsible for managing your account on AWS or Azure to make sure they de-provision any temporary servers after jobs have finished. This practice avoids inflated bills from resources purchased but unused.

10. Right-Size the Services

Right-sizing your cloud computing services can be difficult. But it is necessary to ensure that you use the most efficient amounts of memory for each instance. If there’s anything left over after right-sizing, consider removing unnecessary capacity from these resources, so they work better with what remains.

11. Use The Best Storage Solutions

Amazon S3 is an easy-to-use, reliable cloud storage service. It has almost unlimited capacity and allows users to store their data quickly, partly because of its user-friendly interface and integration capabilities across multiple platforms. These capabilities include AWS or external services, which companies can quickly implement into any existing workflow with minimal time.

Pricing options depend on the type you choose, so check how much space Amazon gives per month and which plan is the least expensive before signing up.

12. Use Savings Plans

The Savings Plans pricing model is an innovative way to save on your AWS usage. Sign up for a one to three-year commitment, and the prices will be consistently low monthly. This method can also help you reduce your AWS spending by 70%.

13. Leverage Spot Instances

Unlike reserved instances, spot instances can be purchased at a low price and are more reliable than their counterparts. Those who need the service quickly but don’t plan on running long-term jobs or processes through them are perfect because it is difficult to judge when a batch job will end.

14. Choose a Single or Multi-Cloud Deployment

The single-vendor approach is typically cheaper and easier to manage, but multi-cloud solutions can provide benefits like increased availability. Evaluate your organization’s needs before deciding how many vendors you would like to handle data storage.

15. Monitor Cost Anomalies

The AWS Cost Management console is essential when managing your cloud costs. The feature load monitoring and cost analysis tools help you stay on top of what’s happening with AWS bills, so your budget stays within the parameters set by company leaders.

A great way to optimize overall spending while minimizing surprises down the line is to use machine learning in conjunction with human intuition.

16. Eliminate Unused Elastic IP Addresses

Eliminating unused elastic IP addresses is a way IT can reduce new resources to save money.

You may detach an Elastic IP address from a running instance or network interface at any time. You can then reassociate the Elastic IP address with another resource after disconnecting it.

17. Review and Reduce Software License Costs

License management is a challenge. Companies can find commercial and public AMIs (Amazon Machine Instances) on the AWS Marketplace with easy license tracking tools. This tool helps reduce spending by identifying idle or unneeded licenses.

18. Implement a Cloud Native Design

When you’re looking to build a new system or upgrade your legacy system, there are plenty of ways that using the cloud can save time and money. One example is designing with auto-scaling capabilities for when demand increases unexpectedly – which often happens in today’s data-rich environment.

The Well Architected Tool provides best practice recommendations on how exactly to do so while still leveraging AWS’ extensive documentation. It also utilizes expertise during implementation, which helps reduce costs significantly as it understands what parts need updating from legacy environments.

Design choices should consider what’s most important to your organization, such as speed or cost savings. For example, a quick DevOps pipeline might not save money. Being practical and finding a balance of needs is critical.

19. Track Cost Center Spending

Given the wide range of cloud providers, keeping track of your spending is difficult. Each cost center may have its AWS account for ease of reporting. If multiple teams with various budgets share one account, tracking expenses is more complicated.

Implement a standard identification method like applying resource tags to identify cloud resource ownership quickly. This way, you can align cost centers to the required reporting granularity using fewer resources.

20. Optimize Costs At Every SDLC Level

Including cost optimization in the software development lifecycle (SDLC) is vital to ensure financial stability. A plan for how much you’re willing to spend on each project and when they will be paid back with interest or profit margins eliminates the need for a contingency fund.

There are four steps to integrating cloud cost optimization into the SDLC:

• Plan: Create a rationale for the budget and ensure it is data-driven to guide technical, debt-related decisions as part of the product roadmap. Doing so helps minimize unexpected costs and adjust the budget using flexibility and agility.
• Operate and deploy: Identify unexpected costs quickly and adjust budgets with agility.
• Design and craft: Record all necessary data to inform architecture decisions based on optimal resource usage.
• Review: To report operational expenditures and return on investment (ROI) with business initiatives and break down costs by team, feature, and product.

These steps allow your company to optimize cloud costs in the software development lifecycle to save resources. 

Saving Money and Time In The Cloud

Consider how your business is presently functioning in the cloud. Is there a transparent Cloud Operating Model for your firm? Have you established a FinOps organization or a Cloud Center of Excellence?

When you have answered these questions, it is easy to see that although cloud cost optimization might seem daunting, it simply requires two things. These two components are nurturing and maintaining good habits and recording metrics and analytics to monitor your progress and continuously lower your end bill. If achieved successfully, a cloud optimization strategy can support digital resilience in the future. 

The post 20 Best Practices & 10 Strategies for Cloud Cost Optimization appeared first on Digital Adoption.

Digital transformation is crucial for the ongoing effectiveness of vendor management because the world is becoming increasingly digital. Businesses need to stay competitive by leveraging technology and IT services, which can be difficult without the right expertise in place.

With the pressure to succeed in today’s business world, many enterprises are outsourcing a wide range of IT services. This allows them to focus on their company’s essential functions. You can take a more comprehensive approach to vendor management when you bolster your IT ecosystem with tools such as digital procurement and sourcing contracts.

Reliable relationships with B2B vendors are crucial for the smooth running of any organization. Furthermore, it’s now common for companies to work with multiple vendors, each of which has its strengths, weaknesses, and needs.

 So, building an effective process for procuring and managing vendors is essential. Vendor management software can often solve inefficient business processes and help businesses achieve total digital adoption. 

Yet the implementation of vendor management systems is not always a priority. A recent Statista report noted that only 12% of global companies actively planned to revitalize their vendor management systems.

This article will explain why vendor management is worth investing time and money in. It will also define vendor management, how it can help save a company money, and how to implement a strategic process to ensure a great relationship with each vendor. Whether not a company goes through a digital transformation to deal with these issues, an efficient vendor management process is fundamental to sustained growth.

What Is IT Vendor Management?

The term “vendor management” refers to how companies procure, monitor, and evaluate vendors to help achieve their business objectives. In large companies, a separate team will deal with procurement, as it is one of the most important steps in the life cycle of a relationship with a vendor,

In practical terms, vendor management occurs with every interaction between a company and its vendors. That might include update meetings, informal conversations, and shared reports. However, good vendor management relies on acquiring robust vendor data. A vendor management system (or VMS) ensures businesses are making excellent decisions around vendors.

IT vendor management is a specialist area of vendor management. The vendor procurement and management process for digital services can be slightly different from general vendor management. Software and hardware capabilities are constantly changing, requiring specialist knowledge from vendor management staff. Furthermore, data around IT processes can be far more vulnerable than others.

As such, a global increase in IT outsourcing has led to more demands on IT vendor management. So although IT vendor management now has its own specialists, in many cases, the best practices within vendor management, in general, do apply to IT.

Benefits of an Agile IT Vendor Management Process

Businesses will implement a formal vendor management process to achieve one or more of the following aims:

• Improved vendor selection
• Cost savings
• Efficient vendor onboarding
• Reliable risk assessment systems
• Predict supply chain problems
• Improved ability to negotiate
• Better vendor relationships

Even with poor records of vendor information, a small business with superficial vendor relationships may be able to handle these areas. But as a company grows in scale and vendor contracts become more complex, it’s important to keep track of progress and create a vendor offboarding checklist. 

The agile approach to project management can bring many benefits to a company. It’s well known that Agile management begins with a simple set of priorities, including:

• Regular face-to-face interactions between individuals
• Producing workable solutions on short timescales
• Collaborating closely with customers and other stakeholders
• Responding positively to change at any stage of a project

Agile working is more popular now than it has ever been. And in a world beset by radical changes, this makes sense: Agile makes organizations highly resilient and capable of swift changes.

Managing vendors with Agile will not always be simple, even in the best circumstances. The client and vendor must have closely aligned principles. Both sides must be ready for daily communication, regular negotiation, and iterative deliverables. Buy-in and commitment will be essential. If a vendor’s business model is not agile, then the partnership would need to take a different direction.

Vendor management software can be beneficial for Agile working environments. It will automatically keep tabs on key performance indicators and all vendor-related information.

The Challenges of IT Vendor Management System

One of the central aims of proper vendor management is reducing vendor-related risks. However, good VMS systems can have challenges and problems that need to be addressed from the outset. 

Here are some examples of issues that may arise from vendor management systems:

• Staffing and personnel. Does the business have well-trained staff responsible for maintaining the vendor relationship? Without a solid vendor management team, you may run into problems.
• Executive investment. As with any digital system, a VMS for IT suppliers will struggle without management consistently supporting the package.
• Multiple vendors operate in different ways. Over time, good vendor management software will naturally help to standardize and streamline processes across the dozens of vendors in a business. But initially, how different vendors handle contracts, invoices, and compliance, can be a real mess.
• Balancing risks from multiple vendors. Even with a great vendor management process, risks will not go away. A VMS can help mitigate risks, but it will not make them disappear.
• Cost management. The price of running an effective VMS should help to ensure that your relationships work effectively. However, the prices of the right staff and software can be high. A complete evaluation before implementation can identify problems.
• Data security. Vendor management software is handy for consolidating and standardizing data. However, it’s important to remember that these systems make data vulnerable to attack. A survey by Statista showed that 50% of companies had seen increases in cyberattacks in 2021. As such, businesses that are serious about their vendor management system also need to be serious about protecting their data.

By keeping these areas in mind, the vendor management team will help to mitigate risks while continuing to meet company objectives.

It’s also worth remembering that the exact implementation of a vendor management system can be challenging. After all, a VMS will aim to solve problems that may have been embedded in a business for a long time.

Before the roll-out of a VMS, a business may have poor control over vendor data, no consistent understanding of vendor risks, and erratic relationship management with suppliers. A vendor management team must carefully plan its digital adoption strategy for companies like this.

The Six-Stage Vendor Management Process

An effective vendor management process ensures that every stage of the vendor relationship is handled carefully. Although a poor management process can cost a company money, there are opportunities for efficiencies and savings at every step of the journey. From initial procurement to offboarding, an active approach with the right vendors can help directly to fulfill business objectives.

1. Establish Business Goals

The first step of vendor management is understanding the current needs and aims of the business. This step underpins every other step in the process. Vendor management is far easier for companies with an apparent core mission.

In this step, the team will eventually decide what solution they are looking for. That might be a new cloud ERP, an outsourced helpdesk, or a new supplier of hand soap for the bathrooms.

But this step is also a time to remember the business’s core purpose. Is it to deliver excellent value retail products, best-in-field digital solutions, or to ensure a harmonious workplace? If a company knows what goals they are addressing in a particular project, all the specifics will be easier to decide.

2. Locating and Selecting The Right Vendor

Some niche services are so specialized that there will be very few vendors to choose between.

However, a business will have many suitable vendors in most areas.

A project with clear business goals will find it easy to determine vendor selection criteria. From there, the project team can undertake market research, make a shortlist of vendors who meet their needs and request proposals from those that seem most appropriate.

For large projects or searches for the most critical vendors, it may not be easy to see which is the most appropriate candidate. Evaluating proposals on a points system can often bring clarity to the process.

This step will function best when the business goals are clear.

3. Initial Risk Assessment 

Having made a choice, it’s time to subject the selected vendors to a full risk assessment.

Some aspects of the assessment will be outside the selected vendor’s control. Problems like price instability, supply chain disruption, and inaccurate market forecasts may have a similar impact on all players in a particular field. A vendor can still explain what they are doing to control any problems in their sphere of work.

Other parts of the assessment will address the project and the vendor. Have they performed adequately in the past? Is their sourcing of labor and materials ethical? Could there be problems with overspending?

In this complex area, it’s possible to work with a risk mitigation consultant to understand how to minimize these problems. This step may be costly, but it increases the chance of a positive working relationship between a vendor and a customer.

4. Contract Negotiation

Although contract negotiation will have a noticeable impact on the project’s costs, this step may still change the nature of the service provided by the vendor. Negotiation is all about giving and taking. Customers who already understand their business goals will be able to adapt to the needs of the vendor.

Negotiation is a specialist skill. It doesn’t come naturally, although it can be learned. For negotiators, skills in empathy, clear communication, and rapport-building are more important than sticking to a hard line.

Both sides have already invested a lot of resources in the process. So it’s in everyone’s interests to work things out for the benefit of both parties.

5. Supplier Onboarding

Onboarding for vendors is an essential administrative procedure. During onboarding, the client company will receive full information about the supplier. Depending on the industry, this may include insurance certificates, bank account details, compliance information, and clear contacts. 

It’s common to leave this information out of the tender process. However, if a supplier can’t provide complete documentation at this stage, they may lose the contract. 

Businesses should expect the supplier to be helpful and considerate. However, just because they are struggling to get their data all lined up doesn’t mean that they are necessarily awful to deal with

An online vendor portal can be a valuable way of collecting this data. It is automated, cost-effective, and more reliable than sending information by mail, email, or fax. 

6. Risk Mitigation and Management

Once the vendor is on board, the risk assessment will operate more continually. As the relationship develops, the risks associated with the vendor will change. A continual understanding of potential problems needs to be sustained.

How can agile working change this process? 

An Agile mentality won’t work with every vendor procurement moment. If a business is working together for specific outcomes, on a strict timetable, or under the watchful eyes of industry regulation, the adaptability of agile thinking could cause problems.

But some vendor relationships will be improved through Agile practices.

An Agile procurement process allows business objectives to change, even while a vendor search is underway. And once the right vendor has been chosen, an agile approach would place less emphasis on a comprehensive contract at the outset of your relationship. Both sides must understand that needs will change and that the vendor and customer will find ways to communicate those needs.

Agile can be a way to secure positive long-term vendor relationships – but it is not the only way. 

The Vendor Life Cycle 

For large companies, vendor relationships can often go on for an extended period. Once a crucial vendor is embedded in a business, no one wants to change without good reason. But the ongoing importance of the relationship means more to come. 

The procurement team evaluates vendor performance and ensures their contractual obligations are met. A business’s vendor management framework is equally important at the end as it is at the beginning. 

IT Vendor Management vs. IT Vendor Procurement

Vendor management and vendor procurement seem similar. They share the goal of controlling costs to fulfill business objectives. However, they are involved with different aspects of the life cycle of a vendor relationship.

A procurement team focuses on all the tasks around vendor selection and onboarding. Procurement takes the time to review all the potential vendors that may do business with the company, seek out the best possible price, and ensure that contracts are favorable to the business in the long term.

A vendor management team will take a much broader view. They are not only interested in securing the cheapest possible price. They are much more interested in managing all the risks involved through ongoing risk reporting. 

The Importance of IT Vendor Relationship Management

Vendor relationship management puts control in the hands of the purchasing company. The process assumes that vendors are keen to offer their services and will work effectively to ensure productive outcomes. 

The client’s control over the relationship is especially important for IT vendor management. The client may need a series of complex integrations that could involve major risks around supply chain disruption, user experience, and data security. Bringing all of that information into one place is vital. 

10 Steps To Building A Strategic IT Vendor Management Process

Improving a company’s overall vendor management takes serious time and effort. It will work much better if the process is strategic – underpinned by long-term goals. 

Gartner has enhanced evaluation criteria for IT vendor selection. Achieving high marks in the evaluation criteria will improve a company’s chances of winning a deal.

IT vendor selection is important for any company looking to stay competitive in the fast-evolving tech landscape. In recent years, Gartner has significantly enhanced the criteria used to evaluate vendors and assign them ranking scores in its Magic  Quadrant report.

This enhanced evaluation process is designed to help companies make more informed decisions when choosing a vendor for their IT needs. It considers factors like the vendor’s market share, competitive positioning, and product quality.

To achieve high ranks in Gartner’s evaluation criteria, vendors must demonstrate a robust product roadmap and commitment to innovation. They must also provide reliable customer support and maintain a solid reputation in the industry.

1. Build A Vendor Management Strategy 

Strategic vendor management takes active control of the full process. With a good strategy, a vendor manager can look at a vendor’s overall contribution to the company.

Whereas procurement teams mainly exist to control costs, a practice of strategic vendor management will comprehensively assess quality and reliability. A good vendor management strategy will consider a potential vendor’s full-service package.

Some organizations invest in a Vendor Management Office (a VMO) to ensure that their strategy is effective. VMOs are especially useful for managing complex IT relationships. 

2. Determine Criteria For Selecting The Right Vendor

The criteria for assessing a vendor will vary, but a formalized approach will ensure that vendor selection can occur quickly.

One simple (but effective) model for vendor evaluation is the ’10 Cs’ model produced by Roy Carter. The 10 Cs remind companies to consider financial information alongside the more comprehensive value a vendor may bring.

3. Source Your Vendors

For niche IT services, even shortlisting appropriate vendors can be difficult. A company that does not understand the market well may employ an IT consultant to ensure they have the most up-to-date market knowledge.

4. Prioritize and Compartmentalize Your Vendors

Vendor segmentation helps to assess vendor performance against the most relevant criteria. Some critical vendors will be a vital part of a company’s growth, making them strategic partners.

Other suppliers will be less crucial but difficult to change. And another group of vendors will be transactional, providing necessary goods and services that would nonetheless be replaceable.

The expectations and risks around each of these groups should be different. Strategic vendors are essential for their overall contribution to the business (not just price). However, this may be the main criteria that would apply to transactional vendors.

5. Assess Contractual Obligations

Vendor contract management will change according to the culture of the company. An Agile organization may focus more on short-term goals and outcomes. While more traditional methods will consider the needs for years to come. Either way, having a standardized contract for suppliers can make onboarding significantly easier.

6. Prepare For Vendor Onboarding

As mentioned earlier in this article, a solid vendor portal is an excellent step toward effective onboarding, monitoring, and reporting on progress and development. Problems can still arise at this stage, so it is essential to sort them out as soon as possible. 

7. Nurture Vendor Relationships

There are plenty of ways a business can enhance its relationship with vendors. Even though the vendor management process often deals with large companies and impersonal transactions, taking a “personal touch” can go a long way.
This may involve check-in phone calls, thoughtful meetings, and corporate gifting. Vendor relationship management is an integral part of the overall strategy.

8. Assess Vendor Performance Routinely

A positive relationship benefits both vendor and client.

However, it’s still necessary to keep a close eye on the performance of each vendor. To do so, effective and reliable data tracking is a crucial tool. With real-time data monitoring, it’s then possible to track vendor performance over time: both here and now, at quarterly intervals, and annually.

If a vendor falls short on its key performance indicators, it’s essential to take action as soon as possible.

9. Undertake Vendor Risk Assessments

With a vendor comfortably on board, it may be easy to forget the risks that may still emerge from the relationship. However, the risk management process must constantly assess the success and dangers of an IT vendor’s contribution to the business.

A 2022 Gartner report suggested that perceived and actual risks differed. While 22% of companies experienced problems with compliance (the most common risk), only 10% believed it to be the most significant anticipated risk. Vendor management professionals know the real dangers and learn how to tackle them. 

10. Learn From Previous Experience

Even the best vendor management processes will never be perfect. With all the expertise and experience, the world is constantly creating new problems for a stable supply chain. 

Best Practices For Effective Vendor Management

A new vendor management strategy can accelerate innovation, enhance organizational resilience, cut costs, reduce managers’ workloads, and more. The three-step process to digital transformation in vendor management is crucial for a working, cross-functional vendor management approach. The benefits of good vendor management will be measured over years of success. 

Using a software solution is one of the simplest ways to ensure vendor management best practices across an organization. With well-trained staff and management buy-in, vendor management can be an excellent opportunity to showcase the power of digital transformation to a company. 

A central reference point for all information makes it far easier to manage risks and secure data. 

Vendor Management Helps to Achieve Business Goals

Vendor Management is a niche area of business expertise. Most of the complex labor goes on behind the scenes, away from end-users eyes. 

But the goals of vendor management are fundamentally simple: making the most informed business decisions to help produce high levels of customer satisfaction. The best practices in the field may be challenging to come by. Once they are embedded, they can make business much easier to do. 

The post How To Build An Effective Procurement and Vendor Management Process appeared first on Digital Adoption.

But what is Gartner BuySmart? How can BuySmart help your team identify critical technologies? And What are technology life cycle streamlined vendor evaluations? We will explore all these questions, beginning with a definition.

What Is Gartner BuySmart?

Gartner BuySmart is an approach trademarked by the leading consultation company Gartner. It seeks to support businesses of any size to evaluate vendors to identify what type of technology they need using the latest insights resources. Within this, the system includes suggestions for vendors and features, which supports a structured, collaborative decision to invest in the best technology from the right vendor to suit a company’s needs.

How Can BuySmart Help Your Team Identify Key Technologies?

Gartner predicts that companies will spend $4.6 trillion on technology by 2023. Companies need to ensure that their massive investments bring the best returns. Gartner BuySmart uses expert insights to help companies seek alignment between better technology purchasing decisions and their needs, leading to better business outcomes. The approach uses a structured process using five steps, the first of which is to start with a template.

Start with a template

Is your company seeking to integrate new technology? BuySmart may be the ideal option as you begin your journey within the Gartner BuySmart template hub. You will find information specific to each software type and many Gartner insights and data within each template. Templates also include detailed requirements lists and vendors considered reputable and relevant to your needs. The templates also incorporate customization tools, comprehensive evaluation checklists, and expert and peer insights.

Manage the evaluation process

BuySmart promotes collaborative workflow, which allows the team’s evaluation process to be diverse and well-structured when choosing new technology. The tool helps teams to define their objectives, key dates, and budget. Another feature of BuySmart is that it supports staff to assign owners while formulating a checklist of tasks. Above all, the approach allows your company to track evaluations, requirements, and vendors in one unified package with the support of industry-leading Gartner experts.

Analyze requirements

Before you begin your evaluation process, you must analyze requirements and acquire all necessary signoff authorizations from relevant team members. Companies can utilize requirements suggested by the template, add their own and alter the priority level for individual factors. Gartner provides scorecards that allow companies to seek alignment across stakeholder needs.

Evaluate vendors

BuySmart supports businesses choose the best vendor through vendor evaluations, presenting the best vendors for specific needs. Gartner is a world leader in objective Gartner insights via research. This research is used within BuySmart to provide organizations with all the information they need to make the final decision. 

The research includes ratings and proprietary insights and allows teams to develop vendor shortlists to score against specific requirements. Gartner also contains features that enable teams to track key takeaways and screen out inappropriate vendors.

Reduce risk

When your team has selected a vendor, they can export the report to communicate this to stakeholders. This communication includes your decision based on selection criteria and the considered vendors. There is also the option to consult with a Gartner representative to meet for a Gartner expert proposal review, within which you can receive support to reduce risk and optimize your investment.

This process is how BuySmart supports teams in finding the best vendor and technology for their organization. But how can teams utilize the technology life cycle today within BuySmart vendor evaluations?

What Is The Technology Life Cycle Streamline Process?

The technology lifecycle is the time it takes for a company to research and develop a product and provide ROI within the time it utilizes, referred to as its lifecycle. Gartner designed BuySmart to streamline the technology lifecycle by reducing the research and development phase time, increasing efficiency, and optimizing this process.

By informing the best decisions for the best technology in a structured way, organizations get new products to market more quickly, driving business value for customers and companies.

What Services Does Gartner BuySmart Offer?

Within BuySmart, Gartner offers four primary services:-

• Accessible and objective Gartner insights: Context-appropriate insights are relevant to your chosen technology evaluations.
• Structured, team-led workflow: All the tools your team requires to access information and act on better purchasing decisions.
• Optimized vendor evaluations: Comprehensive scorecards utilizing detailed requirements support your team in selecting the best vendor.
• Confidence that you are choosing the best vendor: BuySmart optimizes investment and aims to reduce risk, assisted by a proposal review by a Gartner expert.

Now that the services of BuySmart are transparent, we can look at the benefits these services bring to your organization.

What Are The Benefits Of Using Gartner BuySmart?

There are many benefits to using Gartner BuySmart, starting with the optimized spending that BuySmart facilitates.

Optimized spend

The main advantage of BuySmart is that it allows companies to ensure they are getting the most for their investment. The features of BuySmart allow teams to enter their needs and business outcomes to tailor technical requirements to the BuySmart approach to confidently manage the most cost-effective final decision.

Reduced risk of waste

The Mark Gartner BuySmart approach influences the team’s path to evaluating vendors. Reviewing what vendors offer is streamlined so companies can be sure a vendor provides what they need, avoiding common pitfalls and making the best final decision. Resources are not wasted using trial periods or subscribing to a digital tool for a month before realizing it does not fit company needs.

Efficiency and productivity

Because BuySmart streamlines the technology lifecycle process using the team’s requirements to select the right vendor for the company’s needs, employee efficiency and productivity increase. Employee retention can also increase when the company gives them the right tools for their role, reducing frustration and improving employee experience.

Shareholder Value

When BuySmart streamlines the process of choosing digital tools and vendors, it creates more robust and efficiently completed value. This action leads to a faster time to market new products, meaning higher value for customers in a short period. A higher value for customers translates into higher company value to shareholders, increasing confidence for investment in better products, increasing value, and boosting revenue and growth further as companies build digital resilience.

Who Are The Ideal Candidates For Gartner BuySmart?

Any company can benefit from Gartner BuySmart if they want to make the most cost-efficient decisions on technology evaluation and investment. BuySmart utilizes exclusive Gartner research, making it a market-leading approach to vendor evaluation. Whether a candidate company is SME or a large enterprise, if they wish to choose the technology in a structured, collaborative way, they will benefit from Gartner BuySmart.

The Value Of Proprietary Insight For Organizations

Proprietary data is data unique to a company. This data is essential for companies when they need new technology, as they must know their needs to meet them in the most resource-friendly and appropriate way.

Companies should ask questions on how they can maximize the value of insights taken from their proprietary data, such as:-

• What types of data will be valuable to us?
• How can we turn our proprietary data into revenue?
• How can we make public data into valuable proprietary data?

Deciding how to use data and transform it into proprietary insights allows companies to differentiate themselves in the market. It also helps equip companies with the information needed to prepare for deciding what vendor and technology are best.

What Is Magic Quadrant?

Magic Quadrant is a research methodology that provides visual snapshots and in-depth analyses of a market environment within a limited period. The Magic Quadrant shows the status of tech vendors about their competitors to allow businesses to choose the right vendor. There are four quadrants that the system uses to evaluate and monitor vendors continually. The first of these is Leaders.

Leaders

• The most prominent vendors fall into the Leaders category based on their high scores for completeness of vision and ability to execute functions successfully. Vendors in this group usually have control of a specific market segment and strong financial stability and credibility.

Challengers

• Challengers are the next highest grade of vendors, fighting for a position as one of the Leaders. Challenger vendors are capable of disrupting market trends and challenging Leaders. Challengers lack the vision completeness of Leaders but can dominate more significant market segments in time.

Visionaries

• Visionaries anticipate future trends and have a broader view of the market. They are innovative and often create initiatives involving new ways of perceiving customer needs, changing the world with bold market decisions.

Niche players

• Niche players look more narrowly at a more specific market segment as they don’t have the same vision as more prominent vendors. New SMEs are often in this category.

The Magic Quadrant helps companies decide what vendor is best for them. But how can it be used alongside BuySmart?

BuySmart Vs. Magic Quadrant 

The main difference between the Magic Quadrant and BuySmart is that Quadrant formulates the data, and BuySmart forms this data into actionable insights to inform companies’ decisions on technology vendors.

1. Magic Quadrant (top left of chart)

The Quadrant shows the position of vendors in quickly changing markets.

1. BuySmart (top right of the chart)

Gartner designed its proprietary insights consulting service to support companies investing in the best technologies.

2. Magic Quadrant (bottom left of chart)

The quadrant scores vendors based on their vision completeness and capability to execute functions.

2. BuySmart (bottom right of the chart)

BuySmart aligns financial and technical business needs with technology vendors and solutions.

It is helpful to use the Magic Quadrant alongside BuySmart to get the most out of the vendor evaluation process. Doing so can lead to better choices when selecting a vendor.

Vendor Evaluation Is Essential in 2022

BuySmart and the Magic Quadrant are helpful today as companies struggle to confidently manage investments in the best technology solutions to ensure business adaptability. These approaches are essential as they give current data in a constantly changing and disruptive technology market. With these approaches, companies utilize technology optimally, ensuring market sustainability, growth, and boosted revenue.

The post What Is Gartner BuySmart & Why It’s Essential For Growing Businesses? appeared first on Digital Adoption.