5 Factors for Enduring IT Cost Efficiency

From our perspective, cutting IT costs is truly part art, part science. While many great ideas for reducing IT spending exist, ultimately the ability to increase efficiency is typically based on five fundamental factors.

1. Leadership’s Level of Passion and Commitment to Efficiency
When leadership is apathetic about efficiency, the organization as a whole is typically apathetic as well. This lack of passion is often ok, especially in businesses with substantial product or service margins where time and energy may be best spent on areas other than squeezing every last nickel out of operations and administrative dollars. 

However, few businesses have this luxury. In most organizations the leadership’s commitment and passion about IT efficiency acts as a driving force that pervades over time. As an extension of the concept, ‘what gets measured gets done’, most organizations eventually march to the beat of its leadership drum, even in cases where initial resistance exists. As long as the emphasis is consistent, the organization’s mindset, and with it each individual’s efforts, will focus on efficiency as a key goal of every IT initiative or activity.

2. Treating IT Efficiency as a Continuous Operational Objective
Another fundamental factor, consistent with leadership’s commitment, is treating IT efficiency as an enduring concept embedded in every service and activity an IT organization engages in. In many organizations, IT cost cutting is viewed as a periodic event, with sporadic spot audits or spending reviews that uncover a handful of opportunities for additional efficiencies.

These efforts are not without merit. However, they often have little sustainable impact because the mindset is not embedded in the culture, resulting at best in some level short-term savings followed by more spending on ‘bad costs’. When treated as a continuous objective, efficiency becomes a permanent management concept. Like other measures of performance including benefits realization, risk management, quality, and delivery schedules, efficiency becomes a tenet of operational performance.

3. The Organization’s Appetite for Change
Fundamental efficiencies in IT spending frequently require a particular operational approach. Even in federated models, the levers of efficiency that rely on centralization exist. However, organizations that operate in a mostly decentralized model, or one with few controls, may require substantial change to realize material reductions in IT spending.

But change is hard. Organizations and the people within them frequently must relinquish some level of control. People may be re-assigned or even let go to realize efficiencies. Previously accepted requirements are reconsidered. In many cases, strong leadership, good planning, and sound communication may simply be outgunned by culture, existing constituencies, and political maneuvering. In these cases, the ability to apply consistent pressure and accept incremental progress over time is often the required strategy for overcoming all too common obstacles to change.

4. An Idea’s Fit Within a Given Environment
Every environment is unique and a one-size-fits all approach simply doesn’t exist in virtually any aspect of technology implementation, operations, and management. What works in one organization may not work in another, even in what may seem a similar environment. In one organization for example, the procurement organization essentially represented the 800 pound gorilla and no business case, no matter how sound, was going to wrest any acquisition control from the group. Many otherwise obvious opportunities remained unrealized based on, from the IT organization’s perspective, an intractable obstacle to progress.

An organization’s culture, historic evolution, even existing vendor and technology footprints can increase or decrease the feasibility of short, medium, or larger-scale efficiency opportunities. The frequent key to successful cost take out or avoidance is understanding the organizational landscape and using it to inform opportunity selection.

5. The Business and Technical Acumen of IT Managers
Ultimately, individual project and organizational management and technical capability impact efficiency significantly. Seemingly great project managers deliver on time and budget useless technology because they lacked the technical or domain expertise to recognize during the effort that it would not deliver its intended value. IT managers fail to differentiate between projects and continuous operational activities, often investing significant amounts to support short-term efforts or failing to invest enough in supporting or automating an activity that will endure perpetually.

Individuals who lack real IT management and technical project expertise frequently represent huge buckets of organizational waste. Millions are wasted in some IT organizations annually simply because the broader leadership fails to recognize the value of a strong and truly experienced IT management capability. Organizations that pay for quality, whether its internal or external, often see the additional investment returned in the form of spending avoidance that is exponentially greater than the investment.

Organizations with strong leadership commitment to efficiency, an appetite for change, and experienced management are well positioned to realize or continue realizing substantial efficiencies in IT spending. However, even those lacking these fundamental factors can enjoy, through a wide-variety of operational or tactical opportunities, reductions in or avoidance of unnecessary spending while working to incrementally change the broader IT organization towards a larger, more permanent model of efficiency.

To obtain a free copy of 'Cutting IT Costs' (http://www.amazon.com/dp/0985143029/), please send a request to: info@northramp.com.