Five Key Principles for Continuous IT Cost Optimization

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One of the most significant factors on the path to continuous optimization depends on the ability of the organization to become more rapidly adaptable to internal goals and external conditions. The challenge of optimizing IT costs isn't just about trying to reduce the unit cost of IT, but trying to keep a balance between lower unit costs and sourcing IT in a flexible way so that the organization is able to remove or add resources/costs in response to any changes, from both internal and external factors.

A common problem occurs when an organization has been significantly reducing its costs, but then finds itself in a position where the majority of its costs are fixed and on long-term contracts with vendors and service providers. The organization is then unable to reduce or remove further costs if the demand for IT reduces, unless it pays significant penalties to exit those deals. This can also restrain the ability of the organization to repeatedly increase capacity. Therefore, sourcing IT on a variable basis can form a good platform for continual optimization.

By adopting agility as a key principle for optimization, the organization will evaluate initiatives in a way that ranks those initiatives, keeping the costs agile at the top. Once the initiatives are implemented, the focus then moves to demand management — ensuring IT leads the business to consume only what is necessary, and providing options to consume IT in a way that steers the business down a consistent and optimized path.

After years of tactical cost-cutting, many organizations now face the challenge of continuous IT cost optimization after the realization that optimization practices are never finished, according to Gartner, Inc

According to a worldwide survey of 2,053 CIOs, 65 percent of those surveyed stated that the main barrier preventing organizations from achieving continuous optimization of IT costs was related to mindset (that is, the ability for all resources to work together in the same direction with the same goal). CIOs felt that, if organizations were properly motivated and moving to achieve the same goal, they would make a greater impact on savings.

"Organizations don't often achieve the desired results from their optimization initiatives, and costs end up returning into the business," said Sanil Solanki, research director at Gartner. "CIOs should consider incorporating five key principles into their organization's cost optimization practices to form a basis for continual optimization. These principles are geared toward avoiding the danger of tactical cost initiatives, which may seem to generate savings in the short term, but can mean costs returning into the business in the long term."

To continually optimize IT costs and avoid dangers that can be created from tactical cost-cutting, CIOs should incorporate the following five key principles into their cost optimization initiatives to ensure ongoing success of the business.

 

Related Topics : A Big Market for Big Data Jobs, Midmarket CIO, IT Management Automation, SharePoint, Technology Markets

 
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