What drives IT cost reduction?
Organisations want to grow and to lower the costs of IT and other business functions. But in the current global economy, it’s tempting to equate ‘IT cost reduction’ with ‘cuts’, and to make the mistake – usually under enormous financial and time pressures – of taking a chainsaw to the problem when a skilful hand with a scalpel is what’s really needed.
No organisation can cut its way to growth, and this is the tension at the heart of IT cost reduction. This post is about wielding the scalpel, removing the rotten wood while leaving the healthy shoots to flourish. Every case of inflated IT costs is different in its details, but the broad features of the problem remain the same. IT cost reduction is about management capability, process transformation and effective leadership.
What follows are some examples of where these three activities can help to drive down costs while preparing the organisation for growth.
Resource and Asset Management Capability and IT Cost Reduction
By management capability, I mean the ability to manage the IT assets, people and processes which together deliver services to your customers. The cycle of developing this management capability is well known and quite straightforward: measure where the organisation is today; identify and execute improvements; rinse and repeat.
To do this you will need the ability to measure the assets, processes and people that comprise the resources of the Enterprise. But this is much more than a paper exercise – it is at the core of tactical and strategic IT cost reduction. As an example…
- How many servers and other IT devices across the Enterprise are under-used or unused?
- How will you reclaim and recycle unused or under-used assets? (For example, will virtualisation play a part?)
- How many devices are drawing energy from the grid but not being used?
- What’s the process for recycling or rationalising these under-utilised assets?
- How many are being used?
- Could the control of these assets at a fine level of detail deliver significant financial benefits? How can you know how significant, if you don’t have the data, the tools to collect it, or the process to action it? Without an accurate picture, are you at the mercy of your software provider?
The fact is, tools are available that make it possible for an Enterprise to make very significant IT Cost reductions by controlling its asset costs at the micro level with very little human intervention. You just need to complement the tools with a solid process that makes sure the organisation reaps the benefits.
Culture Change and IT Cost Reduction
CIOs and IT managers often don’t like to talk about ‘culture change’ because the term is used in so many different ways. I mean something very specific by culture change, and I believe there are two straightforward ways to make it a reality.
By ‘culture change’ I simply mean the replacement of one set of attitudes and behaviours with another, more useful set. So, for instance, you might want the organisation to live and breathe a ‘no waste’ culture by adopting attitudes and behaviours to conserve scarce resources (e.g. electrical energy, consumables, time). The first way to do this is by paying attention to the detail of IT processes and if necessary transforming them, and the second is the more general area of effective leadership.
IT Cost Reduction Through Process Transformation
Cultures change when behaviours change. The quickest way to change behaviours is to embed the new, desired practice deep in the appropriate process. Continuing with the example of waste, let’s look at the biggest single area of over-spend and waste in the IT lifecycle – the development stage.
What projects and programmes should your organisation undertake, and who makes that decision? What are the criteria for such a decision? How many projects over-run, fail, go outside of their scope, lack focus and accountability, or need to be rescued with emergency cash injections? If the answer is ‘some’ or ‘quite a few’, then the governance processes in this area aren’t working.
It may be that the process is too bureaucratic, or doesn’t have enough checks and balances. It may be that business benefits are not considered at all, or that business conservatism slows down the adoption of transformative technologies that could give your enterprise the competitive edge. In any of these cases, the fact is that the process can be transformed: the enthusiasm and ingenuity of staff can be recruited to drive new behaviours that avoid waste and increase agility, even in such a complex area as programme governance.
How? Define the process. Agree the process. Measure it and improve it and celebrate success. Make sure that reducing costs is seen as the norm, whether in the project delivery arena or elsewhere.
A final thought on process change. We are coming to the end of the era when process change was driven by external objectives, such as compliance with ‘best practice frameworks’. The fact is that these frameworks cannot evolve quickly enough to keep up with new ways of business enabled by technological change. These days, process change has to be driven by internal objectives such as
- Increased availability of IT systems (not just availability in terms of time, but also in terms of space - systems need to be device independent for the end user and accessible from any geography. In the near future the norm will be: if the Enterprise app isn’t available on my Android device or iPad, then it just isn’t available)
- Reduced development cycle times
- Waste reduction
- Reduced carbon footprint
- Efficient lifecycle management from procurement to disposal of IT assets
All of the above examples, when managed appropriately, will drive IT cost reduction.
Effective Leadership must drive IT Cost Reduction
Cultures also change when attitudes change. Attitudes change when those with influence set an example.
Effective leadership in reducing IT costs is about doing the right things and being seen to do them. Make it clear that you are setting the agenda – in this example – we will reduce waste. Question people on how they reduce waste, how they build the desired behaviours into their everyday jobs.
There’s another aspect to effective leadership when it comes to reducing IT costs. It stems from the fact that we are on the cusp of a massive transformation that will be brought about by the need to reinvent business models to leverage cloud technologies and applications, and the convergence of consumer and enterprise IT.
But that is the subject of another post.
