Embed a Data-Driven, Continuous Cost Optimisation Culture in Your Organisation
For a number of years now, IT spend in companies has largely remained stagnant, but IT departments have been expected to deliver more. More innovation, more flexibility, more ad- aptability and services to more users/customers. enhancing delivery is not possible merely by increasing spend – the budget will not allow it. But how do you redirect costs to new inno- vations, when you don’t know what you are currently spending money on?
Historically, IT departments look to periodically reduce their costs; typically, by undertaking a cost-cutting review. Often these focus on obvious areas of high cost or low complexity. These can include: focusing on large IT contracts, hoping to renegotiate for desirable terms; reducing technical staff, hoping others in the team will be able to cover their work. These are traditional quick wins, but are often the only areas addressed. This is due to a lack of readily available information with which to help make cohesive, often complex decision making. There is a great fear in IT of touching anything, when you don’t know what it does. Nobody wants to turn off an old application, that probably does not cost much and probably does nothing, only to see the core IT Service grinding to a halt! The issue is that over time, a large company could end up with 10s or 100s of these applications, so the notion that they don’t cost much does not ring true.
Cost-cutting measures, such as those already described, are usually part of a periodic review of costs, aimed at reducing a certain amount or percentage from the total spend. These focus on the easier to understand “low-hanging fruit”, where cost savings are large, easy to understand and results will be fairly quick to realise. They usually avoid tough decisions and “sacred cows,” and they’re rarely strategic or sustainable. Cost reduction strategies, on the other hand, are designed and implemented to be sustainable, repeatable, and flexible. The purpose of cost reduction is ensuring that through constant cost reviews IT is kept efficient and economical.
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