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How to Improve Your IT Cost Optimisation

How to Improve Your
IT Cost Optimisation

  March 17, 2020      Steven Middeldorp

Newton’s third law of motion – for every action there is an equal and opposite reaction. This universal law works because the universe tries to be fair. If you push against something it makes no sense not for it to push back against you. Your hand pushes on the table, and the table pushes back just as hard against your hand. If it didn’t push back, your hand would go straight through the table. Newton’s law also often holds true with IT Cost Optimisation. What do we mean?

Imagine your organisation believes that it could save money by shifting to online customer service. There is a calculated quantifiable cost-saving identified before considering such an initiative. However, you risk the possibility that of pushback from customers who prefer to speak with live representatives rather than a bot or a computer.

Your IT team may have identified a comprehensive list of possible cost optimisation improvement initiatives. However, not all cost optimisation improvement ideas are worthy of the time and the expense. The key to the most effective improvements will be to assess costs and benefits to decide which ideas are worth the effort.

You also need a clear understanding of your organisation’s baseline IT financial metrics for cost optimisation improvements to be classified as successful.

To decide which cost optimisation ideas are worth it, start with known verifiable facts. Research IT spending benchmarks for similar organisations in your industry. The object is to identify areas where your IT spend may be relatively too high, as well as areas that might be comparatively on the mark.

Your CIO & IT team will also need clarity around your organisation’s baseline IT financial metrics for cost optimisation success. For example, are your initiatives defined by a short, medium, or long term time horizon to deliver a measured result? A month, a quarter, or a year or more? What amount has your organisation budgeted to invest?  In challenging times, organisations are sometimes limited to an IT demand management approach, which is simply what do we stop doing?

With that information, your IT team should assess and prioritise cost optimisation improvement initiatives.

Your IT team must then evaluate each initiative against the following criteria:

1. Investment requirement: What is the size of the upfront investment for the initiative? Is the organisation willing to make that investment?

2. Potential benefit: What is the quantum of the cash savings if the initiative is implemented?

3. Time requisite: Can the savings be gained in this fiscal year or are they delayed?

4. Customer consequence: What consequences are there for our customers?

5. Level of organisational risk: Is our IT team qualified to enact the changes? Will our CIO & CFO ensure the changes are enacted?

6. Level of technical risk: What is the risk that the changes enacted will undermine the ability of our ITFM software systems to deliver as expected?

In 2016 Gartner created a simple grid to assist IT teams to determine which cost optimisation improvements should be made – that grid is reprinted here.

As in the above Gartner grid, to gain an understanding of how initiatives compare to each other, your IT team can plot each initiative to an XY grid that has “benefits” on its horizontal axis, and “costs, time and risks” on the vertical axis. This will provide a snapshot comparison of the level of effort and benefits involved with each initiative.

For example, call centre consolidation and mainframe consolidation both offer high benefits, but more costs, time and risk are involved in mainframe consolidation projects.

Take the time to examine each initiative and work out which you should improve first. Your ClearCost IT Financial Management software is a tool that may be able to assist in creating the quantifiable data needed to commence the cost optimisation that your organisation is looking for. For a live or virtual demonstration, speak to our team today

CategoriesBlog

TagsIT Financial Management software, ITFM, ITFM software, IT Financial Management tool, CIO, CFO, IT Financial Management, IT financial metrics, IT demand management, Gartner, IT cost optimisation, TBM, Technology Business Management

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