3 Kick-Off Initiatives for Cost Optimization

Focus on standardization and cost optimization to fund transformation initiatives.

At least once a year, midsize enterprise (MSE) CIOs should sit down and ask a very important question: “Are we too busy managing hardware and applications to be an effective strategic partner?”

An honest “yes” answer can have a variety of implications, from how IT is viewed by the business to the efficacy of cost optimization and strategic planning. MSEs have a variety of unique challenges, including smaller budgets and limited staff size, but cost-efficiencies that fund innovation are key to growing the business.

The end goals are operational efficiency and a more strategic IT operation

“To support business transformation objectives, MSE CIOs must create highly efficient operational environments,” says Joseph Provenza, Senior Director Analyst, Gartner. “Maximizing the value of each operational dollar spent on technology and personnel is the surest way that CIOs can offset MSEs’ inherent staffing and budget constraints to better fund transformation initiatives.”

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The end goals are operational efficiency and a more strategic IT operation. Cost-cutting is an aspect of cost optimization, and although it will occasionally be a result, it should not be the goal for these changes. Ultimately, evolving IT to be more efficient and a better strategic partner will allow for more innovation and critical growth initiatives.

Gartner has selected three action-oriented kick-off initiatives for cost optimization and funding innovation.

Initiative No. 1: Master IT financial transparency

The first action should be to assess how much of the budget is being spent on run spending or “keeping the lights on.” Generally, this is the most expensive, but least differentiating, part of the IT budget. CIOs need a clear, holistic view of IT spending across the company to highlight inefficiencies and overspending.

Pay particular attention to annual maintenance contracts, as the sheer number can be difficult to track. Reassess these contracts on an annual basis before resigning and determine if it’s time to re-evaluate or negotiate.  

Read more: Improve Your Midsize Technology Spending

Initiative No. 2: Consolidate and simplify infrastructure

If you don’t remember the last time your organization inventoried the infrastructure, it’s time. The goal is standardization and consolidation. If the answer to the opening question, “Are we spending too much time managing things versus adding value to the business?” was yes, consider a few solutions.

  1. Multifunction security appliances: Simplify security infrastructure with a unified threat management infrastructure. These appliances are robust enough to support most MSE needs.
  2. Hyperconverged infrastructure appliances: One hypervisor should be able to support 100 to 150 production servers and up to 100TB of storage, which is a typical MSE setup. They provide simplification in the network, computer and storage arenas.
  3. Standardization: Standardization will occasionally have to give way to business needs, but in general, standardizing the desktop and application platform will reduce staff support time.

The goal is not to eliminate infrastructure, which is an important part of the business — it’s to deliver it with a minimum of financial resources and staff time.

Initiative No. 3: Consider or reconsider cloud and managed services

Cloud and anything-as-a-service (XaaS) solutions can deal with skill gaps and limited staff. Although sometimes more expensive than onsite setups, these options reduce the amount of time staff needs to spend on low-value activities. This enables IT staff to contribute strategically and allocates resources toward innovation and business initiatives, and away from day-to-day maintenance.

These solutions also fill skills gaps in areas where MSEs tend to struggle. For example, 44% of MSEs reported having no employees dedicated to security. Cloud-based security and managed security service providers can provide 24/7 security services, often at a cost similar to hiring a security professional.

Gartner clients can read the full research in 3 Cost Optimization Considerations for Midsize Enterprise CIOs by Joseph Provenza.

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