You shouldn't just consider optimising IT costs in your business on a rainy day. Looking at how to make the most of your IT dollars should be something that organisations consider as an ongoing exercise. We have some advice on how to do this and it's not all about cutting costs.
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When times are tough, it's natural for businesses to look at places to trim the fat and IT is usually an area that bears the brunt of it. Planned IT projects get pushed back or canned as a means to save money. But is this really the wise thing to do?
It is important to understand that IT cost optimisation shouldn't just be on an organisation's agenda when the business is tightening its belt. It is something that needs to be considered regularly.
"All organisations attempt to optimise IT costs,” Gartner research vice-president Jim McGittigan said in a blog post. "But those that do it best focus on cost optimisation as an ongoing discipline, not as a one-off exercise."
According to analyst firm Gartner, while IT optimisation does involve cost cutting, it does matter where you decide to make that cut. Sure, it's easy to dump a big project that required a large chunk of investment, but the focus should really be on eliminating low-value activities. This is a job for the CIO.
Gartner said in a blog post:
Cost optimisation initiatives offer a wide range of potential value that generally reflects the accompanying complexity and risk. For example, optimising procurement processes is relatively straightforward, but offers low to moderate value. Launching the next big customer innovation or implementing cost-savings technologies with the business (such as launching a customer portal) will be more difficult, but generally offer more potential value.
You need to weigh up the value and merit of each IT project and activity to find out where to cut costs or find a better alternative to what your company is doing now.
"Regularly scan the marketplace to stay abreast of what other organisations are achieving to gain knowledge of what is really possible," McGittigan said.
Results of IT cost optimisation may not be immediate. It's a slow burn process and organisations need to be patient when it comes to realising the savings and benefits. As Deloitte consultant Andy Shaw puts it:
"Cost optimisation is not an overnight happening. It takes time and savings are unlikely to be realised in the first year. Companies should not be deterred by upfront investment in their reduction initiatives"
To help organisations on their IT cost optimisation journey, Gartner has some suggestions:
- Create a shared-service organisation for some or all IT services
- Centralise, consolidate, modernise, integrate and standardise technologies
- Leverage cloud services
- Increase IT financial transparency to better manage both supply and demand
- Rationalise and standardise applications before cost-saving initiatives
- Optimise software licencing management and IT asset management capabilities
- Improve procurement and sourcing capabilities
- Re-examine how end-user computing is delivered