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Profit by DesignHow to Master Cost Optimization

March 20, 2025
smart innovation on a budget

Innovation vs. Cost

 

To succeed in 2025, companies must achieve two contradictory goals simultaneously: drive innovation while also reducing operating expenses.

This reality is reflected in a recent Forrester report: 90 percent of organizations are expected to increase their technology spending in 2025 despite increasing budgetary pressures. To accomplish these two seemingly incompatible goals, CIOs and CFOs often feel boxed into one of three unappealing choices:

01 Make investments and cuts quickly... but blindly.
02 Take time to sift through mounds of data, but make decisions too late to be effective.
03 Spend time pulling data, discover that much of it is inaccurate, then end up making a gut-decision anyway.

There is a better option to determine where to invest and where to cut: enable swift and confident decisions through incremental advances in data connectivity and visibility. This ebook lays out 5 small but impactful steps CIOs and CFOs can take immediately to gain real-time visibility into operating expenses without enduring a massive business transformation or system overhaul.

Innovate

Technology is Abundant

Connections are Scarce. Operational Expenses Are High.

Advances in technology, especially AI, have made it both possible and expected to do two contradictory things at once: cut operational expenses and drive innovation.

As a result, CFOs and CIOs are under pressure to answer questions like these:

  • What are innovative ways to lower ballooning operational expenses?
  • How much value are teams creating through greater and sustained innovation? How much value will each initiative deliver?
  • How are inefficiencies in the flow of work (bottlenecks, dependencies, wait states) impacting the cost of work?

Worse, these questions have to be answered while operating in the dark, with limited real-time visibility into the cost of work. CFOs and CIOs know they will need to leverage AI to get answers and achieve results. They understand that AI has the potential to fuel organizations to innovate internally, optimize team efficiencies, and lower costs, freeing funds from “keep the lights on” (KTLO) work for value creation. They know AI also has tremendous potential to drive revenue-generating innovation.

The problem is that AI is neither free nor easy. A recent Gartner article claims that “at least 30% of generative AI (GenAI) projects will be abandoned after proof of concept by the end of 2025, due to poor data quality, inadequate risk controls, escalating operating expenses, or unclear business value.”

The Hidden Cost

AI is Neither Free nor Easy.

The problem is that AI is neither free nor easy. A recent Gartner article claims that “at least 30% of generative AI (GenAI) projects will be abandoned after proof of concept by the end of 2025, due to poor data quality, inadequate risk controls, escalating operating expenses, or unclear business value.”

Part of the issue is that AI depends on connected, organized data. Perhaps the larger constraint, though, is that it’s unclear to CIOs and CFOs alike how and where to implement AI for the highest efficiency or best value. Why? The slow flow of data from the project systems to the financial systems renders decision-making difficult.

Most organizations have an abundance of data, but it’s siloed and difficult to roll up in any automated way. Data silos can exist when teams use different systems across the organization. Data can also be siloed inside the same tool (e.g., Jira) if used by multiple business units or teams, each with a unique data structure and point of view. Often, it’s both.

tech-map
Disconnected Systems
Starting Point: Siloed systems with no communication, leaving businesses in the dark on costs.
Manual Work, Highlighted Dotted Lines
Data stitched together manually, cost rules live in spreadsheets and people’s heads, creating delays and errors.

Most CIOs and CFOs have seen tool sprawl and data fragmentation in action. Corporate strategy goals might be tracked in one tool (e.g., Planview), time tracking in another (e.g., Tempo, Workday), and work management in yet another (e.g., Asana, Jira). Many organizations, such as Salesforce, also have a contract management system in the mix. Meanwhile, Finance has its own set of tools (e.g., Oracle) and system of rules.

All of these tools are independent and, for the most part, disconnected. It’s possible to pull a number from one system to the next, but out of the box, the tools don’t connect automatically and cannot be used to answer questions about how data in one system relates to another. For example, to help translate data from project management tools into financial terms, most organizations manually export and aggregate product management data to spreadsheets (e.g., Excel), where they apply cost rules to accomplish their analysis. This information is eventually pushed to the financial system.

This aggregation-fueled analysis requires a mammoth manual effort and a tremendous amount of time. Someone or some team has to wade through all of the disparate tools to extract data, categorize it correctly, and map it all the way up to corporate strategic goals. Not only does this introduce a high risk of fat-fingered data, but it also takes far too long.

And at the end of all that effort, decisions still aren’t easy to make.

  • The data compares spending vs budget but sheds no light on whether that spend is leveraging capitalization potential on innovation initiatives.
  • The data is clear about how much labor is devoted to cost centers but hazy about how much is devoted to each initiative.
  • The data is available, but it took so long to find that it is now aged and doesn’t reflect the current situation, so there is less confidence in it.

The
Illusion
of Progress

Transformation trap

Large-Scale Transformations
Aren't Working.

 

It’s not working. In 2024, Bain found that more than a third of large companies are undergoing some sort of business transformation at any given time. 88% of those transformations fail! Stated a different way, only 12% of organizations that invest in a business transformation get the results they want. What a waste!

“Our research shows transformations are ever present in business, but the vast majority do not achieve their intended outcomes,” said Melissa Burke, executive vice president of Bain’s Transformation & Change practice.

That number has been up, not down, since 2015, when this article from McKinsey announced a 70% failure rate for transformations. What’s worse is that recent articles from McKinsey cite that same failure rate, showing little to no improvement despite the billions spent on transformation efforts. This means that even with more advanced technology, better data, and refined methodologies, organizations are still struggling to turn their strategic visions into reality. The question isn’t whether transformation is necessary—it’s why so many continue to fail and what it truly takes to succeed.

For decades, CFOs and CIOs have been told the only solution is a digital, agile, or business transformation—or all three.

For the past ten years, management consultancy firms and business magazines have offered up advice about how organizations can be among the few for whom transformations work: succeed with people power, do more at once, and trust us, just keep changing. Even Bain, in the same article where they bemoan an 88% failure rate, says that organizations can succeed if they would only avoid “overloading top talent”! Yet, in those same ten years, all the advice claiming “here’s how you can beat the odds” has not made transformations any more successful. On the contrary, it appears more of them are failing than before.

That’s not to say that consultancies and business experts are wrong. Businesses must continue to find better ways of working to meet changing customer demands. For that to happen, people, processes, and technologies need to evolve. However, objectively speaking, large-scale transformations are not bringing businesses closer to their desired results. No business can afford to dump millions or billions into a long, drawn-out effort that ultimately fails. Not then. Not now. Not ever.

88% of business transformations fail, leaving only 12% to see real results.

VISTA

Visibility, Integration, Strategy, Technology, Agility


What’s Blocking Your View?

Disconnected systems, unreliable data, and complex processes create barriers to growth, but it doesn’t have to be that way. Partnering with Praecipio means systematically removing those barriers to success.

Our VISTA approach offers you a 360° view of your business, enhancing operational clarity, financial visibility, and seamless system integration—so you can enjoy the view from the top.

The Smart Way to drive Change

What's Blocking the Business?

 

The reality is that true change takes time. The problem is that organizations don't have the luxury of waiting: they need results now.

It is possible to have both–small steps toward big initiatives paired with quick results.

Better visibility, better decisions, and ultimately better value can emerge from a series of small improvements, each with immediate, measurable results. These improvements can happen inside existing technology and alongside established ways of working.

Each step builds on the one before, with visible progress at every stage. 

That’s the idea behind VISTA (Visibility, Integration, Strategy, Technology, Agility), the Praecipio approach to empowering fully connected, data-driven organizations with minimal disruption and maximum results.

With VISTA, Praecipio meets clients where they are and moves them one step closer to where they want to be.

VISTA is the way forward for enabling data-driven decisions in your organization. There’s no need to scrap the teams’ current technology and start over. There’s no need to stop work to reinvent processes for months and years on end. And there is certainly no need to invest in some future state of “transformation” that has only a 12% chance of succeeding.

What’s more, CFOs and CIOs can choose to do as much or as little as they want. When an organization has made enough progress to suit its needs, it can pause or even stop. Good enough is enough.

The Efficient Path to Cost Clarity

01 Spread the Key
 Distribute a key across all systems for seamless communication.
02 Connect the Key
Automate system interactions.
03 Aggregate + Visualize
Create reports and dashboards.
04 Define Cost Rules
Set your cost accounting logic.
05 Push to Finance
Automate data delivery to Finance
Get Clear on Project Cost

5 Small Steps with Big Impacts

Getting to the point where a business can make swift, informed, and confident data-driven decisions about cost and investments can be accomplished in five steps. Organizations can choose to stop after one or two steps or to complete all of them. Every step has a measurable impact, so wherever your business is now, it will realize benefits.

The following is what that journey looks like for most companies.

 
1

Small Step #01

Create The Rosetta Stone

Praecipio’s data experts will work with the organization to understand all the places project data is entered and stored. Then, together, we’ll add one small thing to each system to ensure those systems speak a common language. This step can be realized with a relatively small labor investment and in a short timeline.

Solving this problem has likely been lurking on most organizations’ tech-debt pile for years. It’s something most CIOs want to do, and every CFO can benefit from it. Simply accomplishing this step will have a tremendous impact. Again, clients can stop here if this is enough; most choose to continue on to the next step.

2

Small Step #02

Automate Key Connections

The next step is to make simple connections that automate several key system-to-system conversations. The image below shows the typical connections at this phase.

This small step increases fidelity in reporting and confidence in data. CIOs and CFOs also have a clear picture of how to further eliminate manual work. For some clients, this is a stopping point. Others choose to invest in reporting and dashboards, both for ease of access and for support for large language models (AI).

Automate Key Connections
1

Small Step #03

Achieve Visualization & AI Readiness

Once the systems are speaking to one another, it’s time to make it easy to see the reports and dashboards. Achieving this level of organized data is also essential for leveraging the power of large language models. After all, for AI to produce the insights organizations need, it has to be able to find and understand the data.

With basic data visualization, CIOs and CFOs have access to project costs as they are accruing, at least weekly and sometimes daily. Compare this to waiting a month for data to move through the cost accounting process.

The impact of having ready access to near-real-time data cannot be understated. McKinsey found that businesses waste up to $250M per year from poor decision-making alone!

Reporting and dashboards make it so much easier to spot trends and make data-driven decisions:

  • See the labor hours invested to date per initiative. But more, see how much progress has been made for the labor spent.
  • Notice clogs in the delivery flow.
  • See the cost impact across cost centers and suppliers.
  • Compare forecasts to actuals.

See the full picture, faster. With connected systems and real-time dashboards, decision makers can track costs, spot inefficiencies, and ensure every dollar fuels progress—not waste.

Decision Point: Does the progress match expectations? Should any initiatives be scrapped, freeing funds for new innovation?

This step hinges on support from the CFO and Finance team (typically financial planning and analysis, FP&A). Finance doesn’t need to make changes at this stage, but they should verify and validate the automated results coming from the real-time cost visualizations. One reason is quality control. It’s imperative that the numbers are accurate and defensible.

A larger reason to bring Finance into the loop at this stage, however, is for buy-in. Finance processes are complex by design. Rules and standards are put in place to satisfy legal or risk requirements. As such, it can be difficult to contemplate altering those processes. It helps to see firsthand how faster access to information can help ensure money is invested in the right initiatives at the right time.

Bringing in the Finance team allows the individuals who are accountable for accuracy to audit the data coming from the automation for accuracy. It also gives them insights into how spending can be measured not just against budget but against progress. The more Finance trusts the output and the more it understands the benefits of its function, the more willing it will be to make the changes that enable the fourth step: automating cost rules.

2

Small Step #04

Add Cost Rules

Up until this point, cost rules have still been applied manually.

With win #4, that process can be automated for even faster results. CIOs and CFOs that invest in adding cost rules achieve daily visualization from estimation to forecast to actuals for a more complete understanding of the financial impact of project costs.

Added benefits include:

  • Visualization into CapEx/OpEx costs can help adjust to save millions in taxes.
  • Documentation of how costs are calculated is great for auditors and makes the whole organization more defensible.
  • Notice where you are stuck in OpEx. Have you successfully begun building something new (CapEx) or are you still researching feasibility (OpEx)?
Decision Point: Is a tiger team needed to move this quickly to the build phase?

This might seem like a small step, but the clear view into the cost of work can have an enormous impact on maximizing efficiencies, eliminating waste, and optimizing value. As an example, consider CapEx (Capital Expenditures) and OpEx (Operational Expenditures). After completing step four, organizations can see actual progress on initiatives to the point where they can determine CapEx and OpEx impacts and minimize overexpensing projects. Because Finance will be able to see in near real-time exactly when an initiative moved from OpEx into CapEx, they can begin to capitalize operational expenses for that initiative sooner (with full defensibility).

These savings can be immediately applied to another innovation project. In addition, applying cost rules through the project management tools to the dashboard has impacts beyond reporting. Labor cost accounting is a common blocker to teams adopting an agile process like SAFe (Scaled Agile Framework). Translating the data from automated time tools into finance terms can help overcome this barrier and reignite stalled Agile efforts.

2

Small Step #05

Push to Finance

By the time they reach this step, CIOs and CFOs have achieved significant alignment and buy-in, both on the project management side

of the business and among the finance team.

Everyone has experienced tangible impacts from the steps taken to reach this point. CFOs are satisfied that the automated data is at least as accurate (usually more) than their manual process. CIOs are excited that funds are moving from underperforming initiatives to new innovations.

At this point, organizations are ready to connect this data all the way through the financial tools to complete the cost feedback loop and ensure a smooth flow for future planning. 

Immediate benefits of automated data through the financial system include faster communications and savings of millions of dollars in reporting. Plus, organizations can achieve defensible financial consistency and accuracy across all systems.

Long-term benefits include better decisions about which projects to fund in the future.

Organizations that reach this point understand the true financial impact of every project and the effect of project-level decisions on the bottom line. This kind of clarity affects more than just the projects currently in flight.

The learning and insights can be brought to bear on future, similar projects, enabling leaders to make better-informed decisions about where to invest their innovation dollars.

Featured

The Right tools for a Smarter Financial Flow


 

Tool selection depends on your organization’s software ecosystem, company size, and priorities. Choosing the right platform ensures seamless cost tracking, accurate financial reporting, and smarter investment decisions.

Logo-Planview-white

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apptio-white

 

Improvement without interruption

Minimize Disruption. 
Maximize Immediate Results.

Keep in mind that all of the steps described above can and should happen in parallel with an organization’s day-to-day work.

There’s no need to introduce major change and disruption to achieve results. By engaging experts who can make connections behind the scenes, innovation can continue while improvements are being made.

Wherever an organization is in their data maturity and whatever level of commitment they choose, organizations can expect impact after each step in terms of data connectivity, visibility, and access to the information needed to make good decisions.

In an environment where every dollar, yen, and euro must pull its weight (and then some), speed to insight is critical. Connecting data across the enterprise enables organizations to lean out operational expenses and move more money to building new projects that yield innovation and growth, now and in the future.

Minimal Disruption ≠ Zero Disruption.

CIOs and CFOs who want to start bringing order to their data need to keep these five things in mind:

2
No skipping steps. Organizations can stop at any stage, but they can’t jump ahead. Each step builds on the last.
2
Success requires active sponsorship. Consistent engagements from the CIO-CFO level is essential.
2
Face the data reality. Organizations must address inconsistencies, inefficiencies, and governance gaps— including process failures that create compliance risks and reporting issues. Standardizing project hierarchies improves clarity, alignment, and data reliability.
2
Set a measurable foundation. Progress is only as good as the data behind it. Baseline measures, goals, and impact metrics aren’t optional.
2
Validation equals confidence. Testing environments, structured testing periods, and approvals ensure the integrity of the process.
optimize costs. make real progress.

Make Your Systems Work for You.

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