IT Cost Containment must start from CIO organization

We often hear the same set of challenges for CIO – reduce IT costs, align with Business to provide strategic value, etc. Very often, CIOs and IT Managers find it difficult as to where to start. Well, let’s start with the first one – reduce IT costs, before others. Off course, there are several ways to address the “IT Cost” puzzle, however, Gartner’s “IT Cost Containment Framework” provides a good starting point to identify opportunities for IT Cost Containment.

In Gartner’s words, this framework ought to be looked at as best pratices for saving money on IT (bottom-line benefits).

Gartner identifies 3 focus areas –

  • Link costs to demand
  • Reduce resource costs
  • Change operational practices

Some techniques just save money or delay expenditures while others provide business benefits because they reduce complexity and/or provide flexibility and also improve service levels, increase agility and also reduce risks. Few of these techniques take time but some of these are easy to implement (relative to others).

Short-term Opportunities:
Few quick hits could be achieved in areas of:
2. IT PMO + 3. IT Governance: Instituting PMO helps centralize processes, institute standards, avoids duplicate projects, reduce cost overruns, provide better visibility to management etc.

24. IT Operations Process Improvement: Instituting ITIL framework will improve operations and release/deployment activities

25. Apps Dev Process Improvement: Instituting PMI‘s Project Management methodology for managing projects, standardizing development frameworks like RUP, Agile etc for development/testing activities, instituting good quality management practices etc

Reduce Technology cost (11,12,13): Several ways here – Evaluate software/hardware costs, usage and negotiate SLAs or contracts accordingly. Explore and evaluate Cloud, Virtualization, SaaS, open-source and other emerging Web2.0 technologies. Although such actions may not necessarily generate any short-term benefits, but long-term (>5yrs) organizations will benefit from such techniques. This is one area where lots of companies are really getting smart.

Long-term Opportunities:
Few others are long-term programs, would require a change in culture, and executive management support, like for example:
8. Selective Sourcing + 9. Offshore Outsourcing: With right strategy, outsourcing is sure-fire way to save money. Outsource organizations non-value add activities at fraction of cost to BRIC countries and focus on value-add activities to business and customer

Organizations should go after quick wins first and show-case the benefits of using such a framework for IT cost reduction opportunities, before embarking on ones which has a wider organization impact from people perspective. The main THEME of such an initiative such be essentially to (a) reduce costs as much as possible without negatively impacting business critical/value-add services (b) identify and cut waste with process/procedural changes and (c) charge for all IT services (IT Chargeback model).

Now, the reason I say that Cost Containment must start from CIO organization is due to the fact that IT folks generally have access to plethora of data. With the right use of information gathering tools, a good amount of information can be obtained, for further analysis (jointly with business). Hence, I say that CIO’s organization should drive this effort.

In this day and age when every organization is working towards getting lean and agile, it is imperative that CIO’s office take concrete actions to clean up their departments. IT Cost Containment should be treated like a Program (continuous improvement cycle) just like Application Rationalization, and not a project!

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