After years of tactical cost-cutting, many organisations now face the challenge of continuous IT cost optimisation after the realisation that optimisation practices are never finished, according to Gartner, Inc.
According to a worldwide survey of 2,053 CIOs, 65 percent of those surveyed stated that the main barrier preventing organisations from achieving continuous optimisation of IT costs was related to mindset (that is, the ability for all resources to work together in the same direction with the same goal).
CIOs felt that, if organisations were properly motivated and moving to achieve the same goal, they would make a greater impact on savings.
"Organisations don't often achieve the desired results from their optimisation initiatives, and costs end up returning into the business," says Sanil Solanki, research director at Gartner. "CIOs should consider incorporating five key principles into their organisation's cost optimization practices to form a basis for continual optimisation. These principles are geared toward avoiding the danger of tactical cost initiatives, which may seem to generate savings in the short term, but can mean costs returning into the business in the long term."
To continually optimise IT costs and avoid dangers that can be created from tactical cost-cutting, CIOs should incorporate the following five key principles into their cost optimisation initiatives to ensure ongoing success of the business.
Transparency: Higher maturity IT transparency practices are seen as a prerequisite for better supply and demand decisions, and they enable many enterprises to optimise costs and cut costs the right way, while preserving what is most important to the enterprise.
Agility: By adopting agility as a key principle for optimisation, the organisation will evaluate initiatives in a way that ranks those initiatives, keeping the costs agile at the top. Once the initiatives are implemented, the focus then moves to demand management — ensuring IT leads the business to consume only what is necessary, and providing options to consume IT in a way that steers the business down a consistent and optimized path.
Accountability: In order for IT to be continually optimised, leaders must take ownership of the futures of their departments.
At a minimum, leaders must engage with the business to manage the capacity, features and functions that IT provides.
If IT leaders can better predict, with some degree of certainty, the demands on IT, they will be in a strong position to source IT in the most optimal way. One strategy to make the business more aware of its demand for IT is to use techniques such as chargeback and showback.
Simplification: In terms of cost optimisation, simplification is about reducing complexity in order to reduce costs. IT systems are inherently complex, but a lack of standard platforms, inconsistent business processes, and poorly defined IT services and service levels are more likely to drive up IT costs.
Discipline: The principle of discipline ensures that cost optimisation has an accountable owner and is led from the top (normally by the CIO). It is essential to proactively manage cost optimisation and think of longer-term cost targets, with dashboards and metrics to measure improvement, instead of waiting for targets to be handed down from the top management.
Organisations that do this well often create a team including professionals from outside of IT to ensure optimisation solutions consider business outcomes and constraints rather than purely technical specifications.