The role of TBM and FinOps in combatting rising technology spending in 2024

In 2024, IT and security teams face the challenges of managing new technologies, threats, regulations, and escalating costs amid growing economic uncertainty.
To address the need for an expanded technology budget, companies are increasingly adopting both Technology Business Management (TBM) and FinOps. TBM focuses on IT budget governance, while FinOps specifically targets cloud costs. Both approaches aim to enhance transparency of spend, align consumption with organizational goals, and provide a value management framework.

Rising IT Spending

Gartner’s 2024 worldwide IT spending forecast predicts a substantial 8% growth, reaching a total of $5.1 trillion. This growth is attributed to investments in cloud computing, cybersecurity, AI, and automation. These are seen as essential for improving operational efficiency and bridging IT talent gaps. While generative AI (GenAI) has yet to significantly impact IT spending, it is expected to be part of budgets starting from 2025.

In 2024, double-digit growth is anticipated in the software and IT services segments, primarily driven by increased cloud spending. Public cloud services spending is forecasted to surge by 20.4%, propelled by rising cloud vendor prices and higher utilization rates.

Cybersecurity spending also contributes significantly to the growth in the software segment. According to the 2024 Gartner CIO and Technology Executive Survey, 80% of CIOs plan to increase investment in cybersecurity, making it the top category for increased spending, responding to new security concerns posed by AI technologies.

Interestingly, CIOs are reportedly experiencing change fatigue, leading to hesitancy in investing in new projects and initiatives. This trend results in a delay of some IT spending from 2023 into 2024, with continued emphasis on cost control, efficiencies, and automation, while longer ROI IT initiatives are being curtailed.

In 2024, major markets for IT spending are expected to increase (Source: Gartner):

• Data center systems spending: $237 billion in 2023 to $260 billion in 2024.
• Devices market: projected to reach $722 billion in 2024.
• Software spending: expected to increase significantly from $916 billion in 2023 to $1.04 trillion in 2024.
• Communications services market: predicted to grow modestly to $1.5 trillion in 2024.
• IT services: forecasted to be the largest tech market, with spending expected to reach approximately $1.55 trillion in 2024.

Managing Rising Cloud Costs

While Gartner predicts a 20% increase in public cloud services, Forrester predicts that FinOps Open Cost and Usage Specification (FOCUS), an initiative driven by the FinOps Foundation, will become the standard in 2024. This initiative will compel cloud providers to align on cost reporting, providing customers with a vendor-neutral multi-cloud view of their resources.

In 2024, the cost (per user) to run an application will be the ultimate performance metric, making traditional metrics like CPU, memory, disk, and network less important.

As digitally transformed organizations continue their advance to the cloud, the cost-of-goods-sold will be linked intrinsically with operational and services measured at a finer-grained level, examining specific tools, services, and algorithms for cost savings.

Managing Rising IT Costs with Technology Business Management (TBM)

TBM, as the discipline that improves business outcomes by offering a consistent way to translate technology investments into business value, will play a pivotal role in enabling financial stewardship in 2024. TBM helps:

• Justify tech investments, gaining cost transparency, measuring value generated, and optimizing workloads to drive innovation.
• Maximize the value of every dollar of public cloud spend, reducing waste, and making informed spend decisions.
• Manage portfolio and resources, providing visibility into work, capacity, and value streams to accelerate business agility.

Although the synergy between TBM and FinOps is relatively under-leveraged, standardizing data collection and organization for cloud-related expenses and integrating this data into the broader framework of TBM will elevate cloud financial management to new heights in the coming year.

Are you ready to elevate cloud financial management to new heights in 2024?

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Sources:
https://www.apptio.com/blog/chart-your-tech-course-for-2024-5-highlights-from-tbmc-2023/
https://www.splunk.com/en_us/blog/learn/it-tech-spending.html
https://content.serviceware-se.com/ria-vendor-selection-matrix-itfm-tbm