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Rationalizing Long-Living Product Architecture IT Costs: Lessons and Benchmarks for Technology Leaders

  • Writer: Agu Aarna
    Agu Aarna
  • Aug 28
  • 3 min read
Rationalizing Long-Living Product Architecture IT Costs: Lessons and Benchmarks for Technology Leaders

Rising IT costs are a challenge for almost every organization today - especially in industries where regulatory, customer, and legacy system requirements force long-term product and platform maintenance. Rationalizing costs is not just about cutting budgets; it’s about reshaping IT architecture, operations, and sourcing to balance efficiency with innovation.

Drawing from recent industry assessments, here are our key learnings, benchmarks, and practical starting points for leaders embarking on IT cost rationalization.

Need help in figuring out your costs and IT architecture direction?

1. External Spend Is the Silent IT Cost Driver

We’ve seen organizations where as much as 70% of IT budgets flow to external vendors. That spend is often inflated by irrecoverable VAT and vendor profit margins, which add a significant non-value-added cost layer.

Key learning:

  • External development often climbs to be ~50% more expensive per hour than internal teams especially when near-shoring

  • Heavy reliance on external vendors can create cost structures that grow over time and hinder long-term capability building

  • Inadvertently decoupled system architecture tends to hinder holistic architectural approach since subsystem optimization trumps overarching solution soundness

  • Redirecting part of that spend into internal capacity not only reduces costs but also strengthens organizational competence

👉 Action for leaders Assess your vendor vs. internal resource split. A healthy model uses external resources for non-core, boilerplate solutions and builds internal capacity around strategic differentiators.

2. Cloud Optimization Is About Discipline, Not Just Migration

Moving to the cloud is only the first step. Without optimizing how cloud resources are used, and adopting cloud-native development principles, companies tend to actually end up spending more.

Benchmarks show that by leveraging native cloud auto-scaling, organizations can cut ~30% of cloud costs almost immediately. Add volume discounts (e.g., committing capacity for 3 years), and total savings can reach up to 50% compared to a fragmented, pre-scaled setup.

Key learning:

  • Redundant virtualization layers (i.e., to avoid vendor-lock) negate the elasticity advantage of cloud

  • Consolidating to a single cloud provider enables both cost discounts and innovation (e.g., AI services, real-time analytics etc.)

👉 Action for leaders Audit your current cloud estate. Ask whether you are truly leveraging cloud (e.g., elastic scaling, managed services) and whether there are redundant layers inflating costs.

3. Architecture Choices Shape Long-Term Costs

Legacy and dispersed architectures create technical debt that silently drives up maintenance costs. In one case, ~70% of development focus was spent on new features, but velocity remained low due to accumulated technical debt.

Key learning:

  • A healthy balance for architecture-transforming IT teams is roughly: 45% features, 25% tech debt resolution, 20% replatforming, 10% defects

👉 Action for leaders Look beyond immediate features. Track your focus split across features, tech debt, re-platforming, and defects. If a transformation is imminent while “re-platforming” is at or near zero, long-term costs will only rise.

4. Base System Customizations: The Hidden Cost Trap

Financial services, insurance, and other regulated industries with long lasting product offerings often extend core systems with vendor-specific customizations or manual processes. Such customizations incur carry-forward costs which grow every year as products and functionality accumulate.

Key learning:

  • Up to 40–50% of maintenance spend can be tied to vendor customizations and potential associated manual labor

  • Abstraction layer approach (decoupling custom functionality from base systems) can allow organizations to cut carry-forward costs by ~70% over time

👉 Action for leaders Map your core systems and quantify the proportion of spend going to vendor-specific customizations. Prioritize abstraction strategies that let you plug in extensions without perpetual vendor-lock.

5. Cost Savings Require Strategic Sequencing

Cost rationalization is a multi-year journey, not a quick fix. Best practice roadmaps show that the most significant savings - up to 15–20% of annual IT costs - emerge only after organizations:

  1. Remove redundant virtualization and consolidate cloud

  2. Internalize core IT components (e.g., API layers, abstraction layers)

  3. Rebalance development focus across features, tech debt, and re-platforming

  4. Eventually welcome the overarching system architecture approach

Final Thoughts: Where to Start

For technology leaders, the rationalization journey begins with visibility and prioritization:

  • Visibility into where spend really goes - internal vs. external, features vs. re-platforming, core vs. non-core

  • Prioritization of initiatives that unlock both cost savings and future flexibility - cloud-native adoption, architectural abstraction, and organizational rebalancing

The ultimate goal is not simply to reduce IT costs but to make them sustainable and value-generating. Done right, cost and architecture rationalization strengthens resilience, frees resources for innovation, and positions IT as a true business enabler.

Seeking additional thoughts in navigating system architectures and costs?


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