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Why and How to Stop Splurging on Tech Stacks That You Won't Even Need

Sep 15, 2022 - 17 Minutes read
Why and How to Stop Splurging on Tech Stacks That You Won't Even Need

How tech spend decisions got influenced

The pace of change in today's digital world is relentless. As technology continues to advance, so too does the frequency with which organizations are looking for ways to improve their business operations and take advantage of new opportunities by better leveraging IT investments early on.

All this, while staying aware what else might be coming down the pipeline or upwards in top trends that they should pay attention to. Although business decisions regarding tech spends are influenced by several factors, COVID-19 continues to be a dominating factor, impacting and influencing organizational budgets significantly.

Organizations are responding by doubling down on their digital transformation efforts, but the economic downturn has made it difficult for them to not only accelerate these changes but also mitigate any negative impacts on employees who may be experiencing uncertain times at home or work while waiting out this global health scare.

Regardless of the challenges that companies faced and still face due to the pandemic, there’s a pushback against the negative aspects, even as businesses display resilience through actionable strategies that include adjusting company budget to reallocate more funds towards IT spending than in the previous years.

In a 2020 survey conducted by Statista, which sought to find out the impact of COVID-19 on the global IT budget allocation, it was revealed that 60% of the surveyed CIOs and IT workers expected their budget to decrease, while 18% foresaw an increase and the rest of the 22% expected no change whatsoever.

The manifestation of that survey can be seen in Statista’s forecast of global IT spending for 2022, which is predicted to reach up to USD 4.5 trillion, and marking a three percent growth over 2021’s figure. It also shows how IT spending oscillated over the years from 2005 onwards, until you get to 2022 and the forecast for 2023, which are clear indicators of the aggressive tech spending of companies despite the economic turbulence that the pandemic ushered in.

Communication services and IT services are the segments that companies invested most on over the years, followed by devices, enterprise software and data center systems. This spending trend is, of course, quite understandable since communication and IT services make up all the services and tools that companies depend on for smooth business operations.

Tech Spending in the U.S. (2012-2022)Source: statista.com

Why companies end up overspending on technology

What is it that pushes this aggressive bid to feed more investments into technology during times of upheavals that are not yet past? And especially when a lot of those rushed decisions to balloon the tech budget lead to companies that are already grappling with financial challenges into more obstacles and quite possibly, mounting debts.

Yes, technology has become an integral part of modern human lives, but it's not without its flaws. Companies are always striving to keep up with the latest tech trends only to end up overspending on what they believe consumers are looking for, which can lead them down rabbit holes as they try desperately to fix their mistakes before too much time passes by and profitability is lost forever.

Some experts are of the opinion that companies that fail to follow and apply business metrics as a determining factor in their budget decisions fall under the category where they end up wasting money. Instead of the following the logical approach, they seem to be influenced by suggestions proposed to them by people.

When the workload isn't too intense, they can get away with a little bit of extension in their technology investments. But as soon as complex projects start demanding more than the new technology can solve – and there is no way for them to do this without affecting other parts of their business continuity plan – that’s when they realize that they may have overstepped their limits in their budget decisions.

It can also be frustrating when they don't quite understand how everything works or if there are certain features not included in the solution, which surprisingly could make more sense for the users, and may even solve their problems better than anything else.

However, one thing remains constant – they will always seek out new tools no matter how much time it takes because of pressure from an ever-pressing workplace environment. Pandemic put aside, the likelihood that you'll make a tech related blunder seems to be higher than ever before.

Biggest tech investment mistakes companies make

If you are to not be among those that waste money on unnecessary tech investments, here are some of the common mistakes that you should avoid.

1. Overspending on cloud

This may sound quite obvious, but most companies today are investing on cloud due to the many advantages that they seem to offer to businesses, including reducing on-premise server and storage infrastructure costs. The on-premise vs cloud discussion is not new and under these circumstances only gather renewed momentum, as you will find out when you have to decide between the two.

Whether you know it or not, your company could be spending too much on cloud services. Companies without clear sight of how to manage and oversee cloud investments can end up overspending as much as 40%.

According to 2022 State of the Cloud Report by Flexera, 37% of organizations have admitted to making annual IT investments that go up beyond $12 million, while 80% of them revealed that their annual investment on cloud goes beyond $1.2 million.

Even a sizeable number of small and medium-sized enterprises (SMBs), 53% to be precise, are spending over $1.2 million per year on cloud, a growth of 15% from the previous year’s figure.

Cloud spend going to waste due to poor management practices that underestimate or neglect how much resources are being used (especially when you consider all aspects like maintenance) is one of the biggest areas of concern. As a countermeasure, organizations jumped to prioritize on the optimization of their cloud usage and cloud migration of their workloads.

Another area where organizations are known to err is moving all their assets online without modifying them to adjust to the cloud. Here’s a useful guide that can be a great resource if you’re looking for a successful cloud migration plan.

Why is this a problem? If software isn't modified, it may run all the time and draw on cloud resources needlessly, running up big usage costs.

Software in the cloud is different than on your computer. You can't just launch an app and leave it running whenever you want—resources like memory or processing power get allocated as needed, so there's no need for unnecessary overhead.

It could happen with anything from simple collaboration tools to high-end systems that could fill up your cloud storage without you knowing it, because in the cloud these tools will launch and run by default if you don’t modify the settings.

Cloud migration without planning results in overspending risksSource: wsj.com

2. Building custom software instead of buying off-the-shelf

I must admit, this is one mistake that might be a little tricky to avoid, especially if you run a business that encompasses multiple business functions and operations, requiring different set of solutions that typical off-the-shelf tools may not be able to provide.

As we all know, off-the-shelf software are ready-to-use tools that are built with features that can offer balanced solutions to the most common problems, which could work for a sizeable number of companies, but not for all. Because not every organization is lucky enough to suffer from common issues, are they?

Custom-built software are unique because they’re tailored to meet the needs and solve specific challenges that an organization could be facing. This means that there are no two custom apps that are exactly alike, which also makes them stand out among other types of business applications on offer in today’s market.

There’s also another scenario where organizations simply customize an already existing software to meet new requirements or challenges. Both the additional customization and complete built-up from scratch can be done in-house (in case the organization has strong tech resources) or outsourced to a software development agency.

Building custom software from scratch can rake up huge costs, thousands of dollars for a ballpark figure. Not to mention the long development time, which can very well run into several months, incurring running costs of hiring software developers are assigning all hands on deck in case you have your own in-house tech team.

Apart from the primary factor that you will not have control over an off-the-shelf software, there are game-changing software bundle and tools available these days that come with great tech support and upgrade options that would still be much cheaper than building a custom software.

Plus, the off-the-shelf software are available right away for you to use, contrary to waiting for custom development. And you wouldn’t have to hire several developers to use it, thereby cutting down on additional costs that would be spent on more employees.

Just to let you know and decide which option would be best for you, here’s a detailed comparative study that summarizes the pros and cons of custom software versus off-the-shelf software.

3. Still continuing with outdated technology

The burden of this poor decision mostly definitely falls on the CIOs of organizations that should know better than to ignore moving with the times. I mean, need we make it clearer that technology doesn’t stop advancing?

Just take the minuscule example of your mobile phones. Have you seen one performing the same way after three years? And we’re talking about enterprise software here.

The biggest risk of running old and outdated software is undoubtedly vulnerability to security threats that include data breach. According to Identity Theft Resource Center’s 2021 Annual Data Breach Report, the “number of data compromises recorded in 2021 was 23% more than a previous all-time high.

We’re talking about millions of dollars worth of data that gets wiped out simply because the move to a new technology or investing on updates doesn’t come across as a cost-effective step for some companies. As grave a threat as it is, data breach is not the only risk you can run by using outdated technology.

Outdated operating systems (OS), old computers/laptops that freeze or don’t perform properly and irregular maintenance can all lead to frustrated employees, low morale and ultimately lower productivity rate. In other words, you’ll end up losing more than what you think you may have saved.

Here’s a list of the three main risks that you run from using obsolete technology in your organization.

Outdated Software Lead to Data BreachSource: scientificamerican.com

4. Misreading customer needs

Thinking you know what your customer needs more than they do is what leads companies to wasting money on technologies that end up yielding zero to insignificant results. Without asking your customers first if they would like to benefit from or utilize some technology that you want to implement on your eCommerce store, for example, and spending thousands of dollars on that tech could be a mistake that would cost you not just money but precious time fixing that mistake.

Digital innovation is great, but only when you know and are sure that the new technology will result in higher conversion rate, better performance, customer engagement and so on. Unfortunately, overconfidence and the blatant refusal to invest time on customer research have cost and will keep costing organizations that make this simple mistake.

Why you should stop splurging on technology and rationalize it

Tech stacking could quietly be taking up more of your time, energy and money than you may have realized. It could be making your business less efficient with what resources you are left with for core business goals like sales growth or customer support — not to mention it can be downright expensive.

When you inherit a tech stack from someone else (which is more common than you’d think), it can be quite difficult to know where and how best to start. And, you may not have had the grand experience of building your own foundation for what's coming up next, but that doesn't mean there aren’t ways around some challenges.

I bet you're thinking to yourself, "that's not how I do things." But it is. The vast majority of marketing leaders inherit a tech stack from their predecessors and must make the best use out of this situation while also trying not break anything along the way.

If you're like most marketers, your tech stack probably includes a mishmash of old tools and solutions that were never designed for the modern workplace. You might be able to tell yourself, "it doesn't really matter," but I bet there is some part deep inside you wondering what kind of legacy issue could have been avoided by adding just one more tool or app.

Technology is a double-edged sword. While it has enabled your team to become more efficient and effective in ways that would have been unimaginable just 10 years ago, it has also made life difficult when you don’t know which technology will solve what problem or at what cost.

In the light of these difficulties with managing tech purchases as well as effectiveness, mounting expenses creep up seemingly when you least expect them, at least partly due to the fact that companies were not judicious enough in their budget allocation and IT spending. So, if you want to be left with enough capital to invest on other key areas of your business that require equal attention, stop the unnecessary waste on tools that you won’t even need or use.

Stop Overspending on TechnologySource: betanews.com

How to reduce your tech spend and use the money effectively

The list of companies that have failed to recoup their tech investments is long and seemingly endless. The reasons for this are many, including insufficient information, unclear goals and lack of proper planning.

The key is ensuring that each investment meets certain criteria before moving forward with them, or there may not be ample time to research which solutions would actually help business operations rather than just adding another burden on top of everything else.

It’s very important to ask yourself what capabilities you need before making any technology investments. This way, when it's time for an upgrade or new system implementation there won't be any unclear options that could lead your organization down the wrong path towards bad decisions due to lack of clarity.

Trying this approach will lead companies down a path toward success where every decision made on what products or services should go into which stage allows for more efficient spending without getting lost among options they don’t need. It is also how you can offer your company the edge you seek over your competition.

Here are some of the tried and tested ways in which you can avoid overspending on tech stack and instead use the money you saved to invest effectively where it can give you greater gains.

1. Approach problems in order of their seriousness

What are the biggest challenges that your company’s marketing department faces? The best way to find out is by identifying your key problems and putting them in order of their seriousness - ones that are affecting your business the most.

Problems can range from low traffic and poor conversion rates all the way to expensive ad campaign errors like overspending or underspending on social media ads. Identifying these issues early on will give you a better understanding of how much each problem costs your business in the larger scheme, both financially and also in terms of lost opportunity.

2. Identify your most profit yielding department and tech it up

To be successful in the future, you need to identify where your competitive advantage rests, which can be a bit of a challenge because determining it is not always an easy task. But by narrowing down to the processes where maximum value is derived from and exploring technological options that could boost them even further, you’ll be able to see more clearly how the technologies will impact those operations.

And see you will, if and when you make a forecast of how the technology you brought in would impact the value generating process based on a standard that you can borrow from someone or create your own. And at the end of your projected time period, you will have clear results that will tell you how much of a good investment the tech implementation was should you continue with it or not.

3. Find out whether custom or off-the-shelf is best for you

We’re back to this unavoidable discussion, but truth be told, there’s simply no running around it. Considering the advantages that both these type of software bring forth, you just need to get down to serious business and make a choice.

Ready-made solutions are often the best option for businesses that want to get their operations up and running right away without spending weeks in custom development. Even for those that want complete control over technology that's customized exactly as they want them, off-the-shelf software can be just as effective as long as there’s the option and possibility to squeeze in some future customizations that the developers may have offered.

CRM tools like Salesforce, Hubspot and Zoho are prime examples of off-the-shelf software that are well-rounded solutions for all possible business needs and challenges. Here are some of the top CRM software for 2022 that should be under your radar right now.

In case you run an eCommerce business, read this article on the best tech stacks for eCommerce development and how to choose the right one for you.

4. Train your team to adjust to new tech

Technology adoption is not a one-time process. It requires sustained effort from your team to ensure they are prepared for the full gamut of tasks that come with using new tools and technologies in their workday, including adapting to processes depending on what you need most at a point of time.

You need everyone on your team prepared to use these tools and reap maximum benefits because these technologies sure won’t run on their own. If you want your team to take full advantage of these technologies it's important that everyone on staff is trained for their new roles as well so they get used to everything available without any hiccups or worries about being unprepared when needed most.

5. Look for gaps/missing links in your existing tech stack

If you already have a pre-existing tech stack, it would be best for you to analyze it first before jumping to a rushed decision of purchasing new tech. For all you know, your existing technology is probably missing out on just a few additional tools that can easily take care of all your business needs.

Chances are, there are several solutions available in the market that you can simply integrate with your tech stack to solve more than one problem. Not only will it save you from wasting money on overhauling the entire tech stack, you’ll also save time that would be spent on getting your team trained on the new tech stack that you were eyeing.

Here’s a list of the top data integration tools available in the software market today.

Conclusion

Overspending on technology is a trap that many organizations, small and big, fail to escape. These simple steps that we’ve laid down for you can help you make better and more informed decisions in planning and executing your IT budget, while preventing unnecessary spending.

Let us show you how you can save thousands of dollars by avoiding unnecessary tech investment that you don’t even need, without compromising your growth and productivity. Write to our experienced full stack developers at 0707 Agency to start a conversation today.

author

Manab J Kharkatary

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