Organizations worldwide are behind the curve when it comes to funding digital business. Yet, their CFOs are under pressure to make significant IT investments for improving digital capabilities at a time when achieving enterprise growth is a challenge. Reconciling the need to invest in digital capabilities without disrupting growth requires a new approach to cost optimization, as technology isn’t just about operational “run” costs anymore. Increasingly, information and digital technologies are the enablers of both efficiency and growth in a changing world.
“ Some of the greatest opportunities for cost optimization are outside IT, which represents only a small fraction of business costs”
“Cost optimization is not a new topic for finance leaders. However, in the age of digital business, cost optimization takes on new dimensions,” says Barbara Gomolski, managing vice president at Gartner. “It means looking beyond IT and including business costs in the initiative. It also means that simply cutting the IT budget and waiting until the economic environment is more favorable to make digital investments is a flawed approach to remaining competitive.”
Learn More: Cost Optimization Framework for Finance
The cost-cutting cycle
Organizations that have felt the disruption of the digital age, or have been under severe economic pressure, cannot rely on cutting IT costs as a growth strategy. Instead, progressive CFOs should use a mix of IT and business cost optimization measures for more efficient performance while preparing for the digital future.
Some of the greatest opportunities for cost optimization are outside IT, which represents only a small fraction of business costs — 4% on average, according to Gomolski. CFOs are often reluctant to seize the opportunities to use IT and digital technology to drive efficiency in the business because such initiatives bring cultural and political change. For example, when finance leaders try to shrink their IT footprints and lower costs, they soon realize business process standardization is required, which may fall outside their purview.