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Cost cutting drives innovation

With the economy remaining in an uncertain state and IT budgets under continual CFO scrutiny, CIOs must demonstrate they can keep the lights-on and still deliver key projects. Four years into the downturn, IT organisations already feel like they are cut to the bone, but are they continuing to hack away in the same old places? It’s worth reflecting on the must-do’s and refreshing the thinking on new approaches.

Cost cutting should start by focusing on discretionary costs and “quick-wins”:

  • Cancelling non-critical, non-compliant and “pet” projects,
  • Review and rationalisation of software licenses,
  • Identifying and phasing-out niche and low-use applications (which are typically born from pet projects and have very high unit support costs),
  • Getting value for money from contractors,
  • Clearance of organisational “dead-wood”

But that’s easy stuff. The challenge for IT leaders is to develop a longer-term but more innovative plan to embrace budget cuts and efficiency pressures. Critically, sufficient “core” IT muscle must be left undamaged so that the pent up project and change demand can be delivered when business confidence improves.

Rather than approaching yet another round of budget reductions as an obstacle to sustaining or improving services, IT leadership must look at these constraints as an opportunity to provide innovative IT solutions – driving a cost-effective agenda of change while being brutally honest about what services really add business value. There are lots of creative ways to consider, for example,

  • IT organisations remain terrible at explaining why they seem to cost so much. Getting much higher cost transparency of the IT services being delivered is an important first step.  This requires a hard look at the true cost structure in IT, mapping this to the business services at a granular level, producing a re-charge model and ultimately understanding alignment to business objectives. It is important to set this in context by making relative comparisons to industry benchmarks.
  • Ensure a clear, concise and well-defined set of IT architectural guidelines for new projects and new application releases – assessing any ‘violations’ in terms of ongoing business cost to become compliant and thus enabling a better view on the cost-benefit.
  • Reducing complexity in new development – ensure there is a clear understanding of the best-in-breed technology solutions in the business space. This might include benchmark analysis of usage and deployment in other organisations.
  • Drive through infrastructure and related management efficiencies e.g. utilisation of cloud services without getting lost in the hype – everything from mass compute distribution to simple storage ramp-up is feasible even for the most conservative and wary organisations,
  • More efficient management of virtualised infrastructure – measuring and maximising uptime, resource utilisation and time for deployment.

Ultimately, success will be based on focusing on the ends not the means, developing a plan and staying the course. It requires new thinking in IT – there are no IT projects, just business projects. IT must measure itself in a clear transparent way and demonstrate it delivers service in cost-effective and at market-competitive prices.