By Jim McGittigan, a research vice president with Gartner’s CIO Research group, where he focuses on IT financial management.
The declining Canadian dollar value translates to higher operational costs across the board — but particularly for IT, where most materials, equipment and contracts are based on U.S. dollars. Given budgets are expected to be more or less the same, CIOs are under more pressure to manage operating costs.
All organizations attempt to optimize IT costs. But those that do it best focus on cost optimization as an ongoing discipline, not as a one-off exercise.
Create a transparent view of costs.
As a CIO, your first priority should be to make all IT-related activity costs transparent. Next, benchmark how your organization’s spending compares to your peers’. If, say, your ERP costs are above industry averages, that area might be a potential candidate for cost optimization.
As will be discussed at the upcoming Gartner CIO & IT Executive Summit in Toronto, cost optimization shouldn’t be approached as a one-time activity. Regularly scan the marketplace to stay abreast of what other organizations are achieving to gain knowledge of what is really possible.
Consider 10 cost optimization ideas
In the customer portal example, the CIO had a running list of cost optimization ideas that would be of greater benefit to the business than delaying the project. Mr. McGittigan shared the Gartner “Top 10” list of cost optimization ideas:
- Create a shared-service organization for some or all IT services
- Centralize, consolidate, modernize, integrate and standardize technologies
- Leverage cloud services
- Increase IT financial transparency to better manage both supply and demand
- Utilize zero-based budgeting on the right cost categories
- Rationalize and standardize applications before cost-saving initiatives
- Optimize software licensing management and IT asset management capabilities
- Improve procurement and sourcing capabilities
- Invest in Mode 2 capabilities such as agile and DevOps
- Re-examine how end-user computing is delivered
Cost optimization initiatives offer a wide range of potential value that generally reflects the accompanying complexity and risk. For example, optimizing 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.