A Cost Optimization Strategy for I&O Leaders in Uncertain Times

January 12, 2023

Contributor: Lori Perri

When in need of a successful cost optimization plan, I&O leaders must take action with the 4Rs strategy.

With organizations facing economic headwinds, infrastructure and operations (I&O) leaders are challenged to optimize current spend and redistribute these savings into growth areas. It might seem nearly impossible in the current environment, but there are actions you can take to deliver a successful cost optimization program. 

“In this macroeconomic environment, I&O leaders are tasked with juggling the twin needs of controlling spend while helping to position their companies for future growth,” says Gartner VP Analyst Cameron Haight. “These directives are emanating from concerns across the C-suite, from CEOs to the heads of supply chain and even HR, as they attempt to adapt to an increasingly dynamic landscape.”

If your organization is under pressure to cut costs, consider this 4R — reduce, replace, rethink and reninvest — strategy to effectively achieve cost savings.

This strategy tries to present a balanced approach to cost optimization, and suggests that past strategies such as wholesale employee reductions are likely not in the long-term interests of the firm. In addition, it seeks to counsel clients to not just look at cuts per se, but to seek efficiencies through other means and to also consider measures of corporate value beyond the financials. If you reduce, replace and rethink, you will be able to reinvest in order to become more agile and efficient.

The potential targets of each piece of the strategy are:

No 1: Reduce

  • Number of facilities, processes, tools and services

  • Personnel headcount (studies show that this is not always optimal)

  • Levels of service, both internal and external

  • Demand via chargeback options

No. 2: Replace

  • Existing technology, cloud or other services providers

  • In-house staff with outsourcing (this also has trade-offs)

  • Supplier terms and conditions to incentivize risk and cost management

No. 3: Rethink

No. 4: Reinvest

  • Analytics technology to identify improvements in delivery capabilities

  • Infrastructure modernization that enables greater agility

  • Platform-based approaches to improve efficiency

  • New organizational models (DevOps, etc.) to scale labor

As you develop your 4R strategy, consider additional benefits of a nonfinancial nature. Workforce issues such as talent retention, hiring, and diversity, equity and inclusion (DE&I) have risen substantially as strategic business priorities. In addition, environmental issues have become a top focus for senior leadership. The 4R cost savings strategy addresses these growing areas of importance.

In short:

  • Executive leaders must significantly cut costs and control IT spend during this period of high inflation.

  • To do this, I&O leaders must consider optimizing current spend and investing in growth areas.

  • Consider the 4R strategy to achieve desired financial outcomes.

Cameron Haight is a VP Analyst at Gartner, where he primarily focuses on optimizing IT operations automation strategy and design, with an emphasis on human factors.

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