The pressure to remain competitive and invest in digital initiatives is increasing across industries. However, digital initiatives embed information and technology in products and services and are, thus, joint IT-business endeavors. Cost optimization in the age of digital business means looking beyond IT and including business costs in the initiative. It also means that simply cutting the IT budget and taking an approach of waiting until the economic environment is more favorable to make digital investments are flawed approaches to remaining competitive.

Gartner believes that organizations — particularly those in heavily impacted industries (that is, those being disrupted by digital business or under severe economic pressure) — can no longer avoid looking more holistically at cost optimization. IT cost cutting is not a business growth strategy, particularly in the age of digital business.

What are five key principles to cost optimization?

  • Cost optimization is seldom a one-time event; cutting costs the wrong way will often leads to additional goals and the return of unproductive costs.
  • The ability to optimize costs is directly related to the enterprise perception of IT's ability to delivery innovation and transformation.
  • CIOs seldom have the benchmarks at the time of need to find the right opportunities to pursue while leaving alone the areas where value is being delivered.
  • To cut costs the right way, CIOs often need transparency to defend against disruptive and destructive ventures, like outsourcing, staff cuts and lower service levels for mission critical systems.
  • The goals of "doing more with less" are often achievable, but then CIOs are often asked to "do less with less" unless continuous cost optimization practices are created.

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Analyst Q&A with Sanil Solanki, Managing Vice President, CIO Research

Many organisation are dealing with more uncertainty in the marketplace, therefore we've seen a slight hesitation when it comes to funding large scale IT investments. We are seeing less cash invested in total on IT, but a renewed focus on techniques such as agile/DevOps to build or maintain software that can deliver better value to the business at a lower cost than large scale projects.

Most companies don't do cost optimisation, preferring to cost cut when times are hard and invest heavily when the market picks up. The answer is somewhere in between. Cost Optimisation instils a discipline around good financial management that really helps the business in the long term and avoid mistakes that organisations make by having a short term approach to costs. We advise clients to put in place six pillars of good IT financial management that allows IT to show exactly where IT spending is going and the value that can be demonstrated thereafter.

We've seen an increase in organisations looking to fund their innovation through savings found from cost optimisation. The best in class IT leaders manage their three biggest constraints in time, funding and resources effectively in order to maximise the results of their efforts. We've also seen a rise in IT Leaders wanting to know how to measure their digital transformation, so we help them by crafting new digital KPIs that can help explain to senior management just how digital they should be in the future and why it matters.

…waste time and resources, ending up worse off from when they started. Digital transformation can almost be called the new holy grail of our world today. Every business is chasing it as some magical cure to their problems. Most organisations have very little information as to how to calculate what being more digital actually means to their financial statements or what good looks like. They simply want to be more "digital". We help clients quantify their journey, baselining their starting positions and giving them practical advice as to what can be achieved through digital so they can set clear expectations around what the end game looks like.             

Attending Gartner IT Symposium will help IT leaders gain practical advice on how to set expectations around digital transformation to their c-suite. This can often be the hardest task to manage c-suite expectations. Thereafter the chance to connect with peers and speak to analysts can provide great insights that allow you to avoid the same traps as others fell into, to understand key frameworks that help speed up decision making and find out just what is expected of you in your role over the next 3-5 years. As a leader, your success depends on your resources and their success depends on the clarity of your vision. You will be able to test and refine your vision at Gartner IT Symposium.

Cost Optimization & Investment Strategies for Growth spotlight sessions

Battle Plan for CIO and IT Shared Services to Stay Relevant in an Age of Business Unit IT Monika Sinha, VP Analyst, Gartner

Insurance CIOs Need to Balance Value and Costs: Why Ordinary Cost Cutting Isn’t Enough Manav Sachdeva, Principal Analyst, Gartner

How CIOs Can Use Gartner’s S-A-V-E Methodology to Launch and Sustain IT Cost Optimization Programs Jo Ann Rosenberger, Distinguished VP Analyst, Gartner


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