Many CIOs are stuck in a cost-cutting cycle driven by simple expense-line trimming that is not tied to business outcomes. As a result, they are struggling to exploit technology fully in the move to digital business.
Speaking at Gartner Symposium/ITxpo in Australia this week, John Roberts, vice president and distinguished analyst at Gartner, said a new approach to IT optimization is needed.
While opportunities remain to reduce costs in every area of IT, whether through consolidation, streamlining, selective outsourcing or improving procurement to get the best pricing and terms, these tend to provide only modest savings.
“It takes more effort, but there is significantly more potential for IT savings by showing business value,” Mr. Roberts said.
One of the most common questions asked of CIOs is, "What do we get for our IT spending?" CIOs can answer this question by developing financial transparency and running IT like a business.
One of the first steps is to understand baseline IT costs and benchmark IT spending. Leading organizations perform this assessment annually. Not only does this show stakeholders that the IT organization is looking to improve against an external standard, it demonstrates credibility on part of the CIO.
Most IT organizations will break down their budget by functional areas, such as support, data centre, applications and voice and data networking. The second part is to define the business services that IT enables, for example, automated billing, workplace support, customer service, automated operations/manufacturing or business transformation.
By defining these business services and aligning the right costs with each service, IT will be able to show the business the cost of each outcome, making it easier for non-IT leaders to understand where IT spending goes. Removing costs from the conversation shifts it into a more creative discussion.