In Nigeria, as in many other parts of the world, the surge in adoption of on-demand technology is transforming how businesses operate. Yet beneath the promise of flexibility and scalability, a troubling undercurrent is emerging: unchecked costs, growing tech complexity, and yawning governance voids are putting actual returns at risk.
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The Allure of On-Demand Technology
On-demand technology—encompassing cloud computing, artificial intelligence (AI), Software-as-a-Service (SaaS), and other pay-as-you-use models—has become the darling of modern enterprises. It allows organisations to scale rapidly, avoid hefty upfront investments in infrastructure, and tap into advanced capabilities on demand. As highlighted by McKinsey, there’s been a seismic shift from capital expenditures to operating expenses, with approximately 79% of IT spending now going to operating costs.
But this shift hides a bitter irony: while the promise is cost-efficiency, the reality is spiralling bills.
Spiralling Costs: From Cloud Waste to AI Overruns
Reports from Boston Consulting Group (BCG) note that cloud inefficiencies—stemming from overprovisioning, lack of visibility, and inappropriate pricing models—can lead to as much as 30% of cloud budgets being wasted. In Nigeria, the situation is even more pronounced; although local providers like NOBUS Cloud or MDXi offer significantly lower prices—sometimes over 200% cheaper than AWS or Google Cloud—startups often still rely on global platforms due to service limitations, lack of PaaS, and contract inflexibility.
When it comes to AI, Gartner’s findings are sobering: 90% of CIOs say AI costs are out of control, and miscalculations in cost projections can be as extreme as underestimating expenses by up to 1,000%. Meanwhile, marketing leaders are seeing two-thirds of their martech budgets evaporate due to underutilisation—only 33% of platforms are fully leveraged, wasting both money and credibility.
Complexity: Invisible Friction That Erodes Value
As technology stacks multiply, so too does complexity. Cognizant’s Cost Intelligence report shows that visibility into technology spending plummeted from 73% in 2022 to just 53% in 2024. When leadership cannot clearly see where money is going, aligning IT investments to business goals becomes a challenge—65% of firms say they struggle to link tech spend to tangible business outcomes.
This complexity is feeding into tech debt. McKinsey estimates that 20–40% of a company’s tech value is held hostage by deferred maintenance and legacy systems. CIOs report that even innovative budgets are often siphoned off to service tech-debt burdens. In financial services, hidden technology costs can cost private equity firms a staggering 15–20% of expected returns if not properly understood during due diligence.
Governance Gaps: Shadow IT and the Risk Blindspot
As teams rush to adopt new tech, governance struggles to keep up. The rise of “shadow IT”—where departments acquire solutions outside central IT oversight—is widespread. Estimates suggest that shadow IT accounts for 30–40% of total IT spending in large enterprises. This not only fragments budgets but also introduces security, compliance, and integration hazards.
Similarly, decentralised AI initiatives create governance fragmentation. Only about one quarter of AI tools are centrally managed by IT; the rest occur outside traditional oversight, making data privacy and model integrity vulnerable.
Why Returns Are Under Threat
With surging costs, mounting complexity, and governance breakdowns, the ability to generate real business returns is being compromised. Inefficient spending, unclear ROI, unmanaged risk—it all combines to erode stakeholder trust.
BCG warns that regulatory demands, compliance burdens, and fragmented responses add to complexity and cost. Many businesses respond with piecemeal solutions, increasing inefficiencies rather than resolving them holistically.
Moreover, the fallout of these governance gaps—unauthorised tools, poor integration, tech debt—often surfaces only when damage occurs, at which point it’s too late to salvage returns or reputation.
Pathways to Rescue: FinOps, Governance, Simplification
So what can Nigerian organisations—and indeed, businesses globally—do to reclaim value?
- Adopt FinOps and visibility frameworks
Move beyond reactive budgeting to continuous financial management of tech spend. Dubai examples highlight how FinOps aligns IT choices directly with financial goals. - Consolidate and simplify tech stacks
Embrace governance-driven simplification. Martech teams who retire redundant platforms and tighten vendor contracts see measurable gains in speed, performance, and cost efficiency.McKinsey again recommends standardising tech and reducing integration complexity to cut costs and errors. - Embed governance for shadow IT and AI
Centralise oversight over technology acquisition and AI deployment. Gartner’s “tech sandwich” model—data and AI sandwiched between IT and governance layers—helps manage trust, risk, and security. - Value and manage tech-debt consciously
Don’t ignore it. McKinsey advises sizing and paying down high-impact tech debt to free teams for value-creating work rather than maintenance. - Improve due diligence
Especially for investors—understanding hidden tech costs in mergers, acquisitions, or platform overhauls can save up to 20% of expected value.
Conclusion: On-Demand Tech on the Rise in Nigeria
For Nigeria, the promise of on-demand technology is too powerful to ignore. It offers genuine levers for acceleration, inclusion, and innovation. But without deliberate cost control, simplified architecture, and sound governance, that promise can fall flat—leading to wasted budgets, stalled transformation, and lost returns.
The key is to strike a balance: allow agility and innovation, but within a framework that ensures every naira spent translates into real value—and that risks, once invisible, become manageable and contained.
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