According to Flexera’s State of Tech Spend Report, IT costs as a percentage of revenue and operation expenses, is set to increase in over 50% of report correspondents.  Given that expenses will rise, the CIO will need to keep a tight rein on spending versus actually added value to the organisation. CEOs are looking to CIOs to help with cost reduction to support the current pressures of falling revenues and increasing costs, so the CIO needs IT professionals who are commercially aware of the consequences of their decisions.

Many IT professionals are not as fiscally responsible as they could be, rarely treating IT spend as their own. With a lack of governance, transparency, and commercial focus new applications are added to the funnel instead of re-purpose or re-use, with little decommissioning.

Enterprise needs people who ask commercially responsible questions like, “do we really need to consume that?’, ‘do we have one that we can re-use/re-purpose?”, “can we accept a lower level service, reduced volumes, or just take the risk?” or “have we analysed if the supplier is offering value for money?”

Your CIO can enhance the commercial process by recruiting people who have more than one dimension in order to deliver value to the organisation to enable free cash for business growth, company survival, and innovation into new technologies.

What does your IT team need to change to become more commercially savvy?

It could simply be an awareness made apparent though policy or training, however, the more ingrained “commercialness” is ingrained into your organisation’s culture, the more responsive your IT team can become over time.

Once the culture has improved to become more cost-conscious, the delegation of power moves back to cost center owners/consumers. This shift needs to be sustainable at an IT leadership level – all senior IT professionals need to ensure that they keep the level of service their customers expect while delivering value for money.

To begin that culture shift, a number of steps must be taken:

1. Appoint an IT Commercial Director

Someone responsible for IT commercial and performance management since cultural change starts from the top. This is often someone from the IT leadership ranks, who can lead a cross-functional team to drive accountability for commercialisation of IT costs, setting goals and deciding on initiatives for cost-optimisation activities. This needs to involve operational leaders and key staff to look at IT spend in the context of end-to-end business practices. Also, the business must be involved, as effective IT commercialisation requires making value-based trade-offs about which projects, services, and service levels the enterprise can afford.

2. Treat Commerciality as an Ongoing Discipline

Embedding commercial challenges within the IT organisation’s culture requires leadership and planning by the CIO and IT leaders. A key element of success will be to incorporate the commercial challenge behaviors into the wider IT strategy. The success of the strategy will partly depend on the success of commercial initiatives. In order to have everyone in IT thinking about cost optimisation and innovation, idea generation needs to include all IT staff via online tools, while employing a measurement system to evaluate and prioritise all ideas.

3. Prioritise Cost Management

While IT cost management should not be the number one priority – delivering and maintaining IT solutions that add business value is the top priority. Competent cost management must have a higher priority in most IT organisations. This requires increased focus, clarity, visibility, and – most importantly – accountability.

4. Manage Multiple IT Budgeting Views

Successful CIOs and IT Commercial Directors usually manage multiple views of IT spend. Often this is driven by the complexity of the enterprise requiring views by business unit, region, product, and so on. More often, the need for multiple views is driven by the intricacy of IT itself. The fact that IT delivers projects and services requires views of both. The ability to dissect the IT budget into different views aids in demonstrating the business value of IT. This increased transparency can lead to answers to the question, “Why does IT cost so much?” as well as communicating the IT budget in business terms.

5. Employ a Cost Transparency Focus

Focusing on cost transparency can drive cost-conscious behavior to reduce overall spend. This can enable lines of business to make intelligent decisions when making spending commitments while demonstrating that the use of technology is delivering value for money. It can also mean identifying decommissioning and simplification opportunities thereby reducing unnecessary consumption and spending.

6. Benchmark All IT Costs

Benchmarking is a very effective and often overlooked commercial tool. Incorporating effective benchmarking into the annual planning process will not only provide additional financial transparency, but it can also be used as a mechanism to identify areas of opportunity. It is an effective way to track your own performance over time, while comparing it to your peers and also allows you to challenge suppliers’ spend on run and change costs, to form the basis for commercial negotiations.

7. Ongoing Cost Optimisation

Increased demands for IT projects and services, have led IT organisations to utilise a proactive rather than reactive approach that is centrally planned and managed at the CIO or IT Commercial Director level. The main focus of cost optimisation has often been the IT operational budget. However, the focus today is on where IT gets the business involved, thus requiring organisations to make difficult choices about what projects, services, and service levels the enterprise can afford. CIOs and IT leaders have always attempted to optimise IT costs. Too often, cost optimisation activities happen organically in different areas of the IT organisation, with the IT leadership team endeavoring to put together ideas on the fly to hit cost reduction targets. Having the right kind of purpose-built IT Financial Management software can easily identify areas of cost optimisation on an ongoing basis that enable the CIO to make intelligent decisions on where, when, and how to make the most effective cost reductions.

8. Introduce Innovation Processes

In today’s increasingly competitive and disruptive environment, organisations are realising that agility and innovation are crucial to the first challenging and then overcoming competitive threats. the ability to quickly introduce new processes, practices, and technologies that have a measurable improvement on business performance, is increasingly being seen as normal. Establishing a culture where innovation is seen as important can be cultivated by using the right portfolio planning, processes, and structures then provide the mechanics required to deliver real results.

The commercialisation of your IT organisation will accelerate when the CIO and their team are continuously on the lookout for ways to better control IT costs and get the most from every IT investment – your IT Financial Management software is now an essential tool in delivering a commercial IT result. In addition to looking for funding from individual business unit initiatives, reducing the ongoing IT costs associated with running the business is one of the best ways to free up funding for new, value-creating IT initiatives. This is of particular importance to businesses making the transformation into a digital enterprise, with IT-driven innovation no longer a luxury, but an absolute necessity.

To understand how ClearCost’s world-class IT Financial Management software can accelerate the delivery of a commercial IT enterprise, you can request our team give you a live demo – here.