IT cost reduction
CIOs are under pressure to deliver “just enough IT”, yet most cost reduction programs still lack ambition
CIOs have already explored many paths to cost reduction and improved efficiency over recent years. Some might think they have done all that can be done. Even so, with falling share prices and internal cost pressure, the economic crisis has pushed them in an even tighter corner. With the IT budget typically still constituting a fair share of a business’ total cost base (as high as 12% of the Operating Expenses in certain industries), IT remains a prime candidate for cost reduction.
The expectations of the CIO’s internal clients are also evolving. Beyond operational excellence, they also expect from IT the ability to deliver “just enough IT” within constrained budgets. This calls for some IT creativity to execute inventive, pragmatic solutions for a given budget. Faced with these challenges, some IT departments think they have already done everything possible to save money. Application licensing review, hardware consolidation, organisational optimisation... – CIOs have indeed not been idle over the past years. Nevertheless, experience suggests that even the most efficient can usually find additional savings of 10 - 30 percent.
Cost reduction programs impacting IT appear to lack ambition, in spite of the harsh context. In any case, they do not seem to take some CIOs away from a rather conservative stance, applying the same recipes as in previous difficult times. While this might be enough in the short-term to achieve the immediate cuts required by the board, it is not enough to push IT to change and try new approaches. “Just enough” IT spend is probably less than most CIOs would think. Still, it should not be detrimental to the performance of IT and the value it brings to the business. Getting the balance just right requires a careful approach to avoid pitfalls.