Attention CIOs: If you don’t introduce a strategic cost reduction program, someone else will do it for you.
In a recent IDC webinar, Rationalizing Technology Spending: A Transformational Framework for IT Leaders, group VP for IT executive research Joseph Pucciarelli said enterprises that are serious about digital transformation must also be serious about rationalizing IT spending.
Rather than let business executives implement routine, tactical cost cutting measures, IT should take charge as part of a long-term strategy to shift budgets to innovation. “It’s our opportunity,” he said.
Digital transformation is often not about the glamourous change that comes with buying shiny new hardware or the latest software, he said. Instead, it’s about foundational change and changing social norms, and rationalizing spending is important role that IT can play in a broader digital transformation strategy.
Pucciarelli outlined several rationalization principles as a means to fund innovation. First, it needs to be a strategic project, not a tactical cost take-out initiative. It also should be a multi-year project not led by the CIO. “The person leading the cost take-out program should have the freedom of action to take out what [the CIO] might have championed.”
Strategic rationalization of IT spending is also about staff development, he added, and training a potential replacement to handle complex aspects of the organization. It should also be ambitious: Goals should be established without having an initial plan to meet them. Pucciarelli said IT should be looking to shift seven to 15 per cent of spending to reinvest in innovation.
The rationalization must span applications, data, assets, skills and facilities. “Everything must be reviewed,” said Pucciarelli. “Of course, there are countless interlocking interdependencies.” Applications should be the first step, he said, followed by skills, as they dictate what is possible and not possible.
Part of rationalizing applications might be as simple identifying multiple instances, said Pucciarelli, but it can also be about making difficult platform choices that IT should “face into” and involve the CEO. “They are strategic business decisions and there are trade-offs that IT can’t impose on the business.”
Short-term wins can help, added Pucciarelli, but thoughtful, strategic restructuring is required to make a sustainable difference. “Short term wins deliver immediate value but don’t tackle difficult problems.” The goal, he said, should be to have a future platform that is stronger and better.
The big question is how to do this rationalization, starting with an assessment strategy, and not surprisingly, Pucciarelli gives a nod to IDC’s own MaturityScape model as a guide as it helps the organization identify the gap between where it and where it wants to be. These MaturityScapes can be used as a tool to confirm status in particular domain.
One of the challenges IT will face is getting the buy-in of business units when it comes time to reduce applications. Pucciarelli recommends using facts; leveraging IT helpdesk trouble tickets are a good resource of tangible evidence rather than opinions. “You’ve got data as to which apps are causing the problems,” he said. “Bring facts to the table. People generally listen.”