May 22, 2020 | InBrief

Your budgets are slashed—don’t overlook these quick ways to realize IT cost savings

Businesses are attempting to save costs to prepare for what may lie ahead. Quick wins could come in the form of IT spend.

Your budgets are slashed—don’t overlook these quick ways to realize IT cost savings

Businesses everywhere are trying to adjust revenue targets, cut spend across most departments, and best prepare for what they think might be in store the next six to 12 months.   

When it comes to cost saving, CIOs should be looking closely at IT spend. There are many ways to save as much as 15% quickly across the IT landscape. These swift wins take less than three months to realize cost savings, a significant timeframe in an environment where every day counts and quickly proving ROI is necessary. 
We suggest the following for fast wins: cloud optimization, sourcing optimization, project rationalization, software license optimization, staffing improvements, and organization restructuring. Each of these can be executed fairly quickly with lower amounts of complexity, time, and cost. They can also result in immediate cost takeout. 

Companies should then look at ways to optimize costs. These considerations take longer to see savings but can still be accomplished in three to six months. For optimization, start by looking at application landscape, processes, and infrastructure. Examples include application and platform rationalization, process optimization and automation, digital productivity, and process outsourcing. These areas can produce 5-10% overall savings. Longer-term improvements that are more complex and require more investment include complex technology transformation and re-architecture. These will take more than six months to see an ROI but will also position businesses to be more agile and productive in the long run.  

For example, a company that spends $10 million in IT costs, a 10% (on the low estimate) quick win would result in sustainable annual savings of around $1 million. Identifying a few areas of savings can save companies millions in technology costs.

As seen below, CIOs focusing on IT cost optimization should prioritize low-complexity, quick-win initiatives to realize tangible value early in the program. If done correctly, the early initiatives can enable a self-funded cost optimization program.

it cost savings

Cost optimization programs might be the first item mentioned during economic uncertainty, but it should not only be positioned as a reactive strategy. Cost optimization has significant sustainable benefits, too. As shown below, a focus on IT cost optimization also leads to innovative operating models, leaner and automated processes, and a streamlined technology landscape. These benefits result in improved agility, operational effectiveness, and IT productivity. In our diagram, cost savings are just the tip of the iceberg with many other benefits that may not be seen initially.  

IT cost savings

Based on our experience, we know many CIOs see success focusing on tactical, near-term opportunities but often fail when looking longer term. To help solve for this, we recommend IT executives follow these key steps for IT cost optimization programs: 

  • Conduct an accelerated assessment and benchmark of IT cost structure to swiftly understand key areas of improvement and cost optimization opportunity size 
  • Prioritize and implement quick-win opportunities immediately to realize benefits and free up cash for additional long-term, high-value opportunities 
  • Obtain business alignment and executive sponsorship for implementing the long-term, high-value opportunities  
  • Start an IT cost optimization program including both IT and business leaders to prove additional value from long-term opportunities 
  • Proactively manage cost optimization as an ongoing discipline by creating the culture of cost awareness within the IT organization and leveraging automation to report and manage costs 
  • Work with IT and corporate finance to develop an executive dashboard and report cost optimization benefits to executive sponsorship on a regular basis 

Focusing on IT cost optimization not only provides immediate cost savings that the business needs but can also lead to business agility, operational effectiveness, and productivity. If you aren’t sure where to start, or curious to see how much you could be saving, reach out to us.  

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