I had a conversation with Craig Guarente, CEO of Palisade Compliance. Craig said one of the major industry problems is that companies are spending on software just to “keep the lights on.” He said that this cost is curbing innovation in the industry. I looked into it. Here is what I learned.
In today’s tech-driven economy, every company is a software company. But increasingly, CIOs, CFOs, and procurement leaders are asking a tough question: Are we funding innovation, or are we just paying the IT tax?
That “IT tax” is the ever-growing cost of maintaining complex software environments—licensing fees, support renewals, audits, compliance headaches, and mandatory upgrades—all of which eat up precious budget before a single dollar is spent on transformation or growth.
The Innovation Squeeze
Gartner estimates that up to 80% of IT budgets are spent just on “keeping the lights on.” That means security patches, software support, vendor-required audits, and infrastructure maintenance. For many enterprises, innovation is what’s left over—if anything remains.
This imbalance isn’t due to a lack of ambition. CIOs want to modernize. Legal and procurement teams want flexibility. Engineers want to build. But all too often, they’re stuck playing defense—negotiating outdated contracts, responding to audits, or managing the risks of non-compliance.
The Hidden Cost of Vendor Lock-In
Large software vendors know exactly how dependent their customers are. Licensing models have grown more opaque, not less. Take Oracle, where licensing for Java has evolved from free use to complex per-employee or per-processor pricing. Or VMware under Broadcom, where customers are now being told they must shift to expensive subscriptions—with little time to react.
These shifts are not about value. They’re about leverage. And that leverage is costing your business money that could otherwise fund innovation.
What Does Innovation Look Like?
True innovation means cloud-native development, AI-enabled automation, better customer experiences, and faster time to market. But it also means having the financial and operational flexibility to pursue those goals.
That flexibility is impossible if you’re stuck paying for shelfware, redundant support contracts, or forced into upgrades you didn’t plan for.
Time to Audit Your Budget
If you’re in IT, finance, or procurement, this is the moment to ask:
- What percentage of our IT spend is dedicated to innovation?
- Are we paying for software we no longer use?
- Do our vendors offer pricing transparency or take advantage of complexity?
- Can we renegotiate, outsource, or modernize to reclaim budget?
Answering these questions isn’t easy. But it’s necessary.
Because in a world where software is at the center of every competitive strategy, simply “keeping the lights on” is not enough. If your IT spend isn’t moving your business forward, you’re not investing—you’re being taxed.
About the Author:
Ed Heyburn works with organizations navigating complex software licensing and compliance issues. At Palisade Compliance, he helps clients turn IT spend into strategic value—not just a cost of doing business.