CIOs who change the conversation from cost to value are taking the right steps to move away from the cost cutting cycle.
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.
Financial Transparency
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.
Become a Collaborative Digital Leader
Digital business challenges IT because many of the underpinning technologies are outside the domain of the traditional IT organization. In addition, IT organizations that operate as in-house technology service providers rather than as proactive business partners commonly lack the skills needed to engage in the broader business discussions demanded by digital business.
Moving toward collaborative digital technology leadership means breaking down the barriers between the IT organization and other technology enablers of the enterprise. Digital technology leadership requires people with different perspectives, mindsets and responsibilities to work collaboratively on creating business value.
To create business value in a digital world, CIOs must help establish a new leadership team that includes business peers and other relevant stakeholders — all collaborating to integrate, coordinate and lead digital initiatives throughout the enterprise and its ecosystem.
Gartner clients can read more in the report ‘How to Shift the Focus From IT Cost Cutting to Business Optimization’.
John Roberts led a workshop on best practices for IT cost optimization and will also present on ‘How to Manage Your IT Budget Wisely’ at Gartner Symposium/ITxpo on the Gold Coast, Australia, October 26-29.
Gartner Symposium/ITxpo is the world’s most important gathering of CIOs and other senior IT executives. IT executives rely on these events to gain insight into how their organizations can use IT to overcome business challenges and improve operational efficiency.
Upcoming dates and locations for Gartner Symposium/ITxpo 2015 include: November 8-12, Barcelona, Spain
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