How to squeeze more value from a slimmer tech stack

CIOs are under pressure to stretch their IT budgets as far as possible. One approach is to slim down their tech stacks—which our own research has shown are overbuilt and underutilized—in a way that spins off more overall value to the business.

It’s a tricky undertaking, but one that seven-time former CIO Mark Settle (Okta, BMC Software) knows a thing or two about. Settle, the author of “Truth from the Trenches: A Practical Guide to the Art of IT Management,” offers this core piece of advice: Pick your battles carefully. 

Conversation edited and condensed for brevity.

Workers are juggling more software applications than ever. How did we get here? 

The problem is an explosion of narrowly focused SaaS applications. Lay out all of your enterprise software subscriptions. At one end, you'll have Microsoft and NetSuite; at the other, there's the recruiting application that a handful of people in marketing are using to help with scheduling at the annual customer conference. There will be 800 apps in between.

We aren’t talking shadow IT here—software adopted by workers without IT’s blessing. In fact, I’ve dropped that term from my vocabulary entirely. IT executives have spent five decades persuading businesses to use IT more broadly and deeply to support operations. Now they're doing it. They're buying applications and deciding which desktop devices they want. We won! 

Does that create chaos?

Definitely! In some cases, nobody can even remember who bought a product to start with, but there's somebody who thinks the world's going to come to an end if the license expires.

I once consulted for a large fintech company that had reached the point where they needed a central IT group. The company appointed a director as head of this thing. He created a spreadsheet to try to identify all the applications. He had to go through accounts payable and then work backward, identifying the apps by tracking the outgoing money.

After three or four months, I'll bet there were still a quarter of the entries where he still couldn't figure out who the owner was. He couldn't even figure out who to talk to.

As a CIO, you must have seen this chaos up close.

I worked in one moderate-sized startup that bought SaaS software on a three-year contract. There was a pervasive lack of accountability, especially for lots of smaller contracts. Some of the people that had made the original purchase were gone or had moved on to other roles. At times, there was no record of who had bought the software. When our software vendor wanted to send us a bill for the next three years, they couldn't find anyone to bill. Only when the termination date approached would everybody run around trying to find somebody to approve the contract. Due to these last-minute fire drills, we were agreeing to contract increases of 7% to 8% just out of fear that the service was going to get cut off. Otherwise, the recruiting people suddenly wouldn't even be able to talk to candidates or schedule interviews. 

And IT is still left managing those apps? 

In Silicon Valley, most IT executives tell you that they don't want responsibility for 800 SaaS applications. They don't have the technical expertise or the bandwidth. What's the value of wandering into various business units and supervising what they're up to? You'll affect your ability to innovate and explore new and different things. You'll be chasing your own tail trying to keep up with what the functional departments are doing. 

How do you decide whether IT should be managing a product? 

Some companies have a checklist. They ask how big an application is in terms of potential dollar spend. “How many users are there? Is it being used by more than one group? Will it replicate your master enterprise data across multiple systems of record?” They score the application against the list and they might say, “Well, it looks like you've checked for the SOC 2 license and it passes our security, so go off and buy it. You decide who should have a license, and if you've got underutilized licenses, well, you're wasting your own budget money.” Maybe IT will look at the app annually and provide a usage report, but it won't get involved in the day-to-day administration of the tool. 

But surely companies need to save money somewhere in all this? 

In reality, as CIO you’re not paying that much for most of those apps individually, especially when the money comes out of the business departments' budgets, which is part of the new world. If you're trying to enforce the antiquated principle that IT needs to be all-knowing, all-seeing, and all-controlling, you're going to burn up some real political capital trying to save a few thousand dollars.

I once went into a job as CIO and I looked at our spending level for the size and complexity of the company and said, “There must be some duplication of effort. I think there's a million dollars in easy change here.” I told that to the CFO within my first 60 days on the job. I was very naive. When I looked at what it was going to take to save that money, I realized that I probably would have been run out of Dodge in six months. The political firestorm would have been way too strong to survive. 

Is there a point where it's worth fighting those battles?

IT usually gets involved where the big bucks are. The Microsoft or Workday contracts. You might keep a close eye on maybe 70% of the total spending across 150 applications, and another 30% might be distributed over 400-500 services. Individual apps with a larger spend are typically used by multiple departments, and you need to keep a much closer eye on those because that money is not necessarily coming from the different departments. It flows through IT's budget.

How can you rationalize within those applications? 

Best-of-breed apps are often seat-based and don't vary in price a whole lot. Larger enterprise apps tend to have sophisticated enterprise license agreement contracts that contain multiple services and can be more complex. The people from the functional groups' operations teams that buy the software tend not to have central IT's breadth of experience in negotiating those kinds of large, multi-module contracts or understand the trade-offs involved. 

That's where the real money is—sometimes—left on the table. Somebody in one of the functional groups I once worked with got quotes from two different vendors. They just accepted the lower quote and asked us to set up the contract. The cost still stood out to me as unreasonable. So my procurement guy called the vendor and said, “If you don't cut the price in half, we're not going to buy this tool.” The guy halved the price right there on the phone. 

As a CIO, how do you diplomatically bring up inefficiencies in the tech stack?

You can report to senior staff about what the functional departments are spending on software. You can report on a granular level about the number of tools they have, the amount of money they're spending, and the level of utilization. It's a hygiene thing. Then their executive will start probing and asking some questions. Functional leaders have buying power, but they usually don't realize the breadth or collective cost of their app portfolio. If you get them involved in asking questions about duplicated capabilities, cost, and security concerns, you can make progress in enlisting their aid in reducing bloat. 

How do you see the problem of software bloat playing out in the future? 

I think we've got to get out of the habit of talking about the consequences of bloat in financial terms. We need to start talking about the consequences of bloat in employee productivity and operational efficiency and effectiveness terms. Software portfolios will continue to get larger, not smaller. You want that growth to be driven by business outcomes and not personal preferences.

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