Reducing IT costs to finance innovation
In order to maintain or even increase their innovative strength under constant cost pressure, many IT organizations have to generate their innovation budget from their own resources. When IT budgets are tight and there is no possibility to build up positions, we help CIOs to save costs and create free employee capacities at the right starting points - this is how the balancing act between cost reduction and innovation increase is successful.
- How can the innovative ability in IT be increased despite cost pressure?
- Have you done your deed, and do you know your total IT costs?
- Do you have a structured procedure model to attack and sustainably reduce your IT costs?
How can the innovative ability in IT be increased despite cost pressure?
Despite rising expectations and demands from business to IT to provide new technologies and solutions, the IT budget is not increased every year - often it is even cut. After the Corona crisis, further savings will have to follow. A key factor for increased innovation is not only an agile way of working, the right culture, strong management support and the time available for innovation, but also an adequate financial budget.
Otherwise, the basis for rapid development and consistent implementation of innovations is lacking. Sooner or later, the business units themselves drive innovation by building up their own personnel with IT know-how or by commissioning external IT service providers. The competitiveness of the own IT is decreasing!
Frequently, a large part of the IT budget is spent on commodity services, the provision of which, however, does not create a positive perception of IT in the business ("IT must run smoothly"). In many cases, these costs are the right starting point for creating the financial conditions for increasing innovative ability through sustainable cost reduction. Innovations in commodity services can also achieve further cost savings.
Have you done your deed, and do you know your total IT costs?
In order to be able to identify the appropriate levers for optimizing IT costs, an organization-wide transparency of the type and amount of costs incurred is necessary. Even here, many companies fail, because besides complex and opaque cost structures, it is not possible to clearly define which costs can be attributed to IT. This makes it difficult to derive measures that will lead to a significant reduction in IT costs in the long term. In the worst case, exactly the opposite effect will be achieved, since in the case of uncoordinated action, the focus is only on the short-term aspect of the measures. What is missing here is an overall view of all areas and services of IT as well as consideration of the long-term effects on the business. A structured approach and a clear plan are essential here!
Do you have a structured procedure model to attack and sustainably reduce your IT costs?
Too often measures are defined hastily without considering the necessary steps before - usually there is no structured procedure. In this case, we are at your side with a tried and tested procedure consisting of 3 phases:
Phase 1: Creating transparency
In order to gain transparency over the existing cost structure, a profound understanding of the IT organization and the services provided is essential. This is the only way to ensure that all cost drivers are properly recorded in the subsequent phases of the analysis. It is crucial here to achieve the broadest possible, objective view of the entire organization. Focusing on certain areas of optimization too early can lead to further savings potential not being taken into account. In this case, it is a good idea to break down the cost blocks on the basis of the central units of IT (infrastructure, applications, cross-sectional functions). For each unit, transparency is then created in detail about the respective cost types (e.g. personnel, investments, contracts with service providers).
Phase 2: Identify cost drivers
Once transparency has been achieved in the existing cost structure, the central cost drivers are identified. In order to narrow down the cost drivers, the cost items must be understood in detail. A detailed analysis and quantification of the cost drivers according to their savings potential is crucial for deriving effective measures. Subsequnetly the analysis results are consolidated and clearly presented. The document serves as a basis for decision-making to determine the focus areas for the implementation of measures.
Phase 3: Derive measures
When deriving measures, in addition to effectiveness and effort, particular attention must be paid to feasibility, compatibility with the IT strategy and sustainable success. Savings can also be achieved through new approaches and technologies. Based on these criteria, the measures are evaluated in a decision matrix. The preparation of a detailed implementation plan for the prioritized measures forms the conclusion - depending on the scope, experience shows that the implementation period extends over 3-12 months.
Innovations in and for IT require financial power. This is the only way to create the conditions for transforming IT into a driver of innovation. Create the appropriate financial freedom through a structured approach to sustainable cost reduction. Are you ready?
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Whitepaper on transparency in IT costs, Agility is not a silver bullet
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