Top 10 Ways for CIOs to Optimize IT Costs

IT Cost Reduction | Binary Tree

To become a truly competitive, high-performing organization, you need to keep your IT costs lean and mean. Top-performing organizations around the world know this. They’re great at optimizing IT costs—and using the resulting savings to be more innovative. Here are the top 10 ways they do it.

“The variance in IT costs between best-in-class organizations and poor performers is significant—often 30% or more.” — Gartner 2017

1. Adopt cloud-first

Train your organization to think cloud first. Putting new applications and servers on the cloud—rather than falling back to on-premises data centers—helps reduce a host of physical and labor costs. Let’s start with the hardware. Large cloud providers like Microsoft get a hefty discount on hardware because of the volumes they order. So where you might pay $5,000 for a server, they get the same server for $500. And there are often similar savings for IT labor. A 2016 Forrester report found that many organizations spend 80% less time on IT maintenance when they switch to the cloud.

2. Set up shared services

Look for places where you can consolidate similar IT services, resources, applications, or servers being used by different business units. This helps tighten up redundancy, make things more consistent, and reduce risk.

3. Consolidate data centers

Organizations around the world have been working on this one for 10 years. According to IDC, the number of data centers worldwide peaked to 8.55 million in 2015, expected to drop to 7.2 million by 2021. But that’s still a lot of data centers. The first wave of server consolidation focused more on consolidating spaces. Organizations would close several smaller sites in favor of a single, larger site.

Now, it’s all about really adopting virtualization, which can help you deliver a cloud-like experience in an even smaller physical footprint. Which means server sites are getting smaller and smaller, too. So along with consolidating your servers, be thinking about ways to shrink the size of your data center, too.

4. Use a hybrid workforce

Just like you can use the cloud to burst utilization at peak times, you can do the same with your workforce. Instead of keeping more headcount than you need year-round, use contractors and vendors to flex up and down before and after peak times. Or look for ways to bring in managed service providers to oversee an ongoing function, like managing the cloud. This can free up your full-time people for more specialized, value-add projects.

5. Improve IT financial transparency

As CIO, you need to have a handle on at least 95% of IT spend across your whole organization—not just what’s in your budget. Gartner says that 81% of IT spending is, on average, within a CIO’s budget. The other 19% is often split between the business units and shadow IT. Work with your finance team to get the complete picture of IT costs. But note that CIOs don’t necessarily need to own 100% of IT spending across the business. That can be a rather heavy-handed approach and can stifle innovation. But you do need more visibility and transparency so that you and other executives can make more informed decisions.

6. Prioritize spending based on need

Too often, organizations need more technology support than your IT team can reasonably give, thanks to fixed or even shrinking IT budgets. Demand can easily exceed supply. When IT can’t do what people need, they might forge ahead with their own shadow IT, which can be risky. To help fix that, IT needs to define and cost its services based on demand. Meet with your business partners to prioritize which services they need most. Then spend your resources accordingly.

7. Automate

Look for ways to automate common IT workflows, like setting up new resources or installing updates. Automation helps avoid human error and frees IT teams up for more value-add tasks. Plus, to automate a process, you must often simplify it first. All of this can add up to good things for your organization—including cost and time savings.

8. Manage assets better

This could be as simple as getting all employees on a more consistent set of devices and operating systems. That way, your team doesn’t have to spend as much time testing application features across so many devices. You could also look for products that make asset management easier, like Microsoft Enterprise Mobility + Security.

9. Standardize applications

Gartner puts it simply: “Get as many groups as possible to use the same application for the same task.” Over time, an organization’s application portfolio tends to sprawl and become complex. As an example, you might find that your sales teams each use their own customer management system. Where it makes sense, consolidate.

10. Brainstorm with the business

Gartner says that organizations who are most effective at optimizing IT costs have a proactive process in place with the right stakeholders, with key people from IT, finance, and the business. That’s because many of the greatest opportunities to optimize cost actually lie beyond IT. So you should meet often with your business partners to drive conversations about cost. Bring ideas and examples of ways to cut IT costs and see what sparks with your users.

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References (from Gartner):

  • How CIOs Can Work Effectively With CFOs to Optimize Cost. June 2018.
  • 2018 CIO Agenda: A U.S. Perspective. March 2018.
  • Supporting Cost Optimization in the Business: A Gartner Trend Insight Report. March 2017.