Gartner Research

Restructuring IT Costs: Flexible IT for Flexible Business

Published: 01 June 2009

ID: G00168769

Analyst(s): Barbara Gomolski , Andy Rowsell-Jones

Summary

In economic downturns, flexing IT costs as business conditions change is tricky. Cost flexibility is the right response but carries a long-term cost penalty. CIOs can pull short- and long-term levers to flex IT costs, synchronizing them with business cycles.

Table Of Contents

Foreword

Executive summary

  • Demand volatility ups the value of IT cost flexibility
  • Vary short-term cost drivers to increase IT cost flexibility
  • Vary long-term cost drivers to embed IT cost flexibility

Demand volatility ups the value of IT cost flexibility

  • IT costs need to be flexible to shadow business activity ups and downs
  • Flexible cost models may look cheaper—But beware
  • IT cost flexibility is of most value when demand is uncertain or volatile
  • Paying for IT flexibility buys agility

Vary short-term cost drivers to increase IT cost flexibility

  • CIOs can pull multiple complementary levers to make IT costs more flexible in the short term
  • Where governance arrangements permit, flex activity levels directly
  • Flex five IT resource costs
  • Change IT operating models and business practices to make IT costs flexible

Vary long-term cost drivers to embed IT cost flexibility

  • CIOs can pull multiple complementary levers to make IT costs more flexible in the long term
  • Build flexibility into governance
  • Build flexibility into the skills base
  • Good analytical skills: Scenario planning
  • Sound supplier management
  • Standardize and commoditize services
  • Standardize and commoditize supplier relationships

Conclusion

  • Case Study: easyJet—A practical approach to adopting flexible supply
  • Case Study: MarketResearchCo—Being more viable with variable IT opportunities
  • Case Study: PMA Companies—Avoiding supply risk in a risk- management business
  • Case Study: Ranbaxy Laboratories—Governing cost variability and flexibility
  • Case Study: Reliance Capital—When flexible IT cost models are worth the added costs
  • Case Study: Scottish Water—Negotiating flexible terms for flexible IT costs
  • Case Study: U.S. Treasury Inspector General for Tax Administration—Planning for flexibility

Further Reading

  • Gartner Executive Programs reports
  • Core research

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