Capitalizing on technology budgets: A CIO’s story

In today’s competitive business setting, enterprises are constantly under pressure to maintain profitability amid challenging economic conditions. While traditional approaches to bridging the profitability gap, like layoffs and budget cuts, can harm company culture, an innovative and practical alternative is capitalizing on technology budgets.

By leveraging data-driven methods, businesses can optimize and reclaim operating capital from their extensive technology budgets, reducing expenses without resorting to drastic measures.

The art of capitalizing on technology budgets

Advice from finance leaders often casts a negative shadow on non-finance leaders in budget decisions and planning. However, it’s important to remember that headcount and budget cuts are not the only strategies to streamline costs. Capitalizing on technology budgets presents a viable solution. This strategy enables Chief Information Officers (CIOs) to reduce costs without resorting to layoffs or budget cuts while retaining staff and continuing projects that might be axed.

Tech and tech-adjacent expenditures, including categories like Customer Relationship Management (CRM), cloud and data services, billing, software, network storage, business process outsourcing, telecommunications services, and data center technology, represent significant expenses. This pool is ripe for reduction, resulting in substantial savings.

The Atlantic Aviation story

Recently, I had an in-depth conversation with Tracy Mozena, the CIO of Atlantic Aviation, who shared her journey in navigating technology budgets. Atlantic Aviation, a leader in aviation ground support services, is a compelling case study illustrating the significant financial benefits that organizations can reap from capitalizing on technology budgets.

Tracy ran IT for a management company that owned five businesses and made technology decisions for the group of companies to benefit from economies of scale. The impact of the COVID pandemic triggered the divestment of all those companies, and Atlantic Aviation was the second to last entity sold and acquired by KKR. Tracy came along with Atlantic Aviation after that transaction. 

Technology decisions made for the combined five companies weren’t necessarily the best strategy moving forward for Atlantic Aviation after its divestiture. They brought in Deloitte to evaluate the situation, which, after their analysis, recommended quite a bit of outsourcing. Tracy’s team of around 30 people couldn’t support that model. 

Atlantic Aviation’s CFO brought in AIQ, whom he had worked with in the past, to evaluate their technology expenditure. Atlantic Aviation’s procurement team, which consists of only two people, is focused mainly on purchasing fuel — the business’ most considerable cost — not on IT. This move deepened Tracy’s initial concern about changing too much too fast. However, she was consistently impressed with AIQ’s data-driven process and the significant cost savings they drove. It convinced her that there was potential for substantial savings. It was encouraging that a small number of technology categories considerably impacted expense savings.

AIQ’s engagement with Atlantic Aviation encompassed a high-level assessment of technology expenditure, identification of technology categories with the highest potential savings, executing numerous procurement auctions, and delivering negotiated contracts ready for execution. Tracy appreciated that cost wasn’t the only focus, but also SLAs and support. She needed to consider the ability of her small team to support and roll out any changes. AIQ even helped them find the right partner at the right price and level of support. Tracy thought the results were remarkable:

• Total savings have surpassed $1 million so far (with more to come), exceeding Atlantic Aviation’s savings commitment to its Private Equity even though the project is only partially complete.
•  Auctions have been conducted for four technology categories: managed voice, mobility, hardware, and security cameras. These have delivered, on average, over 30% savings, with one category delivering over 70% savings and another with almost 50% savings.

Key takeaways

Atlantic Aviation’s story underscores several vital points:

1. Innovative business strategy: Procurement consultancy and procurement auctions are not tactics commonly used by IT and procurement. However, Atlantic Aviation’s success demonstrates its effectiveness in driving significant cost savings.
2. Embrace data-driven decision-making: The rigorous data-driven AIQ process built trust and made embracing change easier for Atlantic Aviation.
3. Collaboration is critical: Interdepartmental collaboration between Finance, Procurement, and IT is crucial for the success of a technology cost-harvesting initiative.
4. Focus on value, not just price: The lowest bidder does not always win. There are non-price factors to be considered, such as the importance of maintaining business continuity.
5.  Change management is essential: A well-defined change management plan can help mitigate disruption and ensure a smooth transition to new suppliers.

When I asked Tracy what advice she would give other CIOs, she said, “Be open to using a company like AIQ. Don’t be resistant to opening up your contracts and costs to inspection. Things change so fast in tech that a decision you made even two years ago might be worth evaluating as competition and pricing dynamics change quickly. Also, you must be willing to do the work after all the negotiations because changing technology in an enterprise is hard work and time-consuming. Don’t bite off more than you can chew.”

By following Atlantic Aviation’s lead and implementing a data-driven approach to technology budget capitalization, enterprises can achieve significant cost savings without sacrificing quality or service. This approach can free up capital for strategic investments that drive growth and profitability.