Building a reliable IT strategy requires enterprises to understand and consider hidden costs as well for better ROI.
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In a constantly evolving and dynamic digital economy, enterprises are often guided by a resilient IT strategy that enables them to embrace tech-driven change more quickly. But several enterprise leaders often fail to understand why their new quests and ventures into the digital landscape often end up hurting their bottom line. While most direct costs are accounted for in the IT strategy, there are hidden costs that can create significant financial challenges for organizations.
The hidden cost saga
Let us explore 7 such hidden costs that most businesses are likely to face in their digital journey:
Technical debt
One of the biggest cost challenges that enterprises deal with in their application development journey is technical debt. In simple terms, it is an umbrella term for long-term escalating costs that a software development exercise must bear because of the shortcuts it took to prioritize faster delivery over quality code. Market conditions often force engineering teams to scale and evolve applications rapidly without placing emphasis on code quality, documentation, and process adherence.
While this provides short-term wins, it is ultimately a hidden drain on IT budgets since the challenge result in teams spending a considerable time resolving defects in the long run and inability to seamlessly add new features without major architecture-level re-engineering efforts. Technical debt takes a heavy toll on both cost and development philosophies and can slowly turn into a major financial liability for enterprises.
Integration costs
Systems integration is a major part of any large enterprise application development initiative. While on paper, it may seem relatively easy, the mix of legacy and modern components, combined with 3rd party tools in the integration pool, creates major financial implications. As the number of integration points increases, so do the associated costs of API development, testing, validations, etc.
The presence of several legacy systems will drive up costs due to the requirements for tailored development effort for customizing connection points. Additionally, data flow approach brings new considerations into the mix as different systems may need either singular or bi-directional data flow for operations, leading to further customization costs.
Vendor complexities
It is a common IT strategy for several enterprises to diversify their tech partnerships for cost considerations. For example, they may pick one vendor for availing a single or multiple cloud services, and another for cybersecurity, and another for AI, etc. However, when engaging with a complex web of vendors, there is a high chance of the business ending up paying for overlapping services as well as for fixing conflicts or integration challenges between dependencies.
For example, some cloud providers may have their arsenal of security tools that could have covered the business’s security needs. Rather than utilizing it, the business may be paying extra for another cybersecurity vendor. In other areas, confusion between who handles specific initiatives like security could create problems. For example, API or integration point security may be handled either by a cloud service provider or by an integration partner, or may necessitate collaboration between them, which must be coordinated by the business. Failure to understand such complex vendor challenges can create hidden and escalating operational costs in the long run.
Learning and training initiatives
Enterprise technology will continue to evolve and perhaps at a faster pace in the coming years, thanks to advancements in AI and other promising avenues. Given the fact that customers have always shown extra affinity towards businesses that constantly innovate, no enterprise can afford to miss out on enhancing their tech landscape and embracing innovations to remain competitive. While the technology migration and enhancement part is often covered in traditional IT strategies, a key cost area often missed is the investments required for training and upskilling staff. When technology evolves, there is an imminent need for the evolution of skills amongst employees who use the tech to serve customers. Additionally, when staff leave, replacement staff must be trained as quickly as possible.
When adopting new software innovations, it is extremely important for enterprises to lay down a plan that also involves a strategic learning environment to quickly equip staff with the resources needed to operate the new tech efficiently and seamlessly. Without a solid learning plan, intermittent and random learning programs will lead to severe cost escalations during the operational phase that may not have been budgeted initially in the IT strategy.
Infrastructure costs
While most IT strategies have specific budgetary considerations for infrastructure, the real concept of what constitutes IT infrastructure often varies and can create hidden cost inefficiencies. In the cloud era, license or subscription fees incurred for different components availed as cloud services can quickly get out of control. From basic digital services to security platforms, networks, storage, and advanced AI tech, there is a gamut of infrastructure considerations to be managed in the modern enterprise digital landscape.
Poor infrastructure planning could create performance issues, resource underutilization or overutilization challenges, integration challenges, security vulnerabilities, and much more. These add up costs when issues start to surface and remedial measures are to be adopted. From a pure infrastructure perspective, energy consumption behaviour as well as resources consumed for heavy-duty hardware like data centers can also have hidden facets that escalate costs if not planned properly.
Evolving security oversight
The evolving threat landscape that modern enterprises deal with is a constant threat irrespective of the quantum of investments made for preventive measures. It is a continuous investment. While a core IT strategy may include this ongoing investment perspective in its journey, it is likely to miss out on the investments needed for supporting capabilities such as equipping staff with knowledge on security best practices, making allocations for patch management, resolving false positives consequences, and much more.
Enterprises need to be more proactive in identifying hidden risks and account for them while strategizing new growth roadmaps and allocating respective budgets.
Managing compliance
As the digital economy grows, nations globally are bringing more stringent regulatory frameworks to protect citizen rights across their digital footprints. Most IT strategies developed for businesses have a core focus on compliance with major regulatory frameworks. But they often forget to assess compliance-related costs that occur in the long run. Over time, regulatory frameworks evolve, leading to new mandates. These mandates require new security workarounds and practices, which could include even re-engineering entire application modules to stay compliant. Even on the human resource front, there could be scenarios requiring constant certifications, credential upgrades, and much more.
It is extremely important to accommodate such costs while preparing the overall IT strategy, or the business could face significant financial risks in the long run.
Beating the hidden cost saga
These 7 hidden costs stem from a foundational mistake of leaders not being aware of the scale of digital complexity that arises from modern software initiatives. The path to resolve them could be simple, but it needs more than just guidelines and best practices. What businesses need is a strategic partner that understands the bare anatomy of any successful digital transformation initiatives and can prepare a roadmap that considers even the most granular hidden costs.
This is where Trinus comes into the picture as a leader in enabling today’s businesses to realize the best ROI from their tech investments. Get in touch with us to learn more.
FAQ
What are hidden costs in an IT strategy?
These are costs which are often masked or nested deep within traditional IT cost frameworks and are only visible upon closer audits.
How is compliance a major hidden cost for businesses?
The compliance landscape evolves globally, resulting in frequent needs for audits, employee awareness, and software architecture reconfigurations, which drive up costs.
What is technical debt?
Technical debt is an umbrella term for the costs incurred for reworking applications because their initial development focused purely on faster delivery and not best practices and quality.