IT cost optimisation – avoid dimming the lights.
It’s very easy for information technology (IT) to be seen as an overhead that is purely there to “keep the lights on”. When the belts begin to tighten, business and technology leaders must quickly make informed investment decisions. They must decide where and how much to invest in IT, striking the fine balance between delivering effective, secure, reliable and cost-effective services whilst also continuing to invest to achieve desired business outcomes. Economic downturns don’t help this fine balance – especially when juggling unplanned situations such as COVID-19, which require rapid IT focus and spend to enable a remote workforce.
Speaking with business and technology leaders recently, broader economic changes and short-term shifts in ways of working have shined a light on previous areas of under-investment. Key areas identified include; lack of process automation, limited digital customer service and “frailties” across the supply chain. Business leaders are expecting improved quality and flexibility from IT services, which are both cost effective and able to be delivered quickly. In response, IT leaders, must still carefully balance short term demands with longer term strategic IT ambitions.
How do business and technology leaders carve a path forward where they can avoid ‘dimming the lights’ (i.e. maintain adequate IT services), while also optimising existing IT spend to free up capital that can be better spent on progressing the organisations strategic IT agenda?
Acting rapidly to optimise IT spend and using this reduced cost to strengthen IT services in the medium-term. Sounds easy right? We are seeing many organisations responding in the following ways and see three key themes emerging to support immediate cost optimisation:
- Identify areas for turnaround: Organisations are assessing current IT platforms and costs to identify areas where cost optimisation can be achieved. This includes IT service delivery models, staffing mixes, analysis of third party arrangements and immediate removal of those technologies not delivering value. The aim: reduce complexity and costs.
- Optimise the cloud: While workforces continue to work remotely, activity and demand of cloud services continues to rise. Organisations seeking to maximise their investment in cloud services are looking to drive lower costs via license rationalisation, usage optimisation and getting fine grain data insights to highlight where greater cost recovery can occur. The aim: reduce cloud expenditure by approximately 10%-30% and use these savings to reinvest in growth or innovation objectives.
- Re-examine the IT portfolio: Mission critical processes need to be maintained and strengthening of remote work networks, data compliance, security and regulatory requirements cannot be ignored. However, organisations are quickly examining the IT project portfolio and reshaping capital IT investment to divert money to self-service (i.e. new channels), automation (i.e. chat bots, artificial intelligence), consolidation and enhancement of digital channels (i.e. streamline of front end channels) and increased use of ‘everything as a service’. The aim: balance tactical cost optimisation while building a sustainable IT function that can meet future business need.
It can be easy to simply cut IT costs like a hot knife through butter, but organisations must balance the need to manage profitability while also considering strategic needs of the business. Hasty cost reductions can create longer term damage through missed opportunities to simplify, reorganise or reposition the IT function and the services it provides.
If there is one thing every business and IT leader should consider, it is “how can I position IT cost optimisation initiatives to strengthen our organisation and make us better for the future?”
When organisations get this balance right, they can use IT cost optimisation to become nimbler and improve revenue, reduce cost and enhance experiences staff and customers.