Five Key Principles for Continuous IT Cost Optimization

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In terms of cost optimization, simplification is about reducing complexity in order to reduce costs. IT systems are inherently complex, but a lack of standard platforms, inconsistent business processes, and poorly defined IT services and service levels are more likely to drive up IT costs.

To be sure, there are factors other than complexity that drive high IT costs (for example, quality of IT staff, quality of leadership and geographic location). However, complexity does impose an unnecessary surcharge, and Gartner estimates that surcharge can be as much as 25 percent on a unit cost basis. That means the same IT unit of work could cost up to 25 percent more in a highly complex environment than it would in a streamlined environment.

However, the goal should never be to simplify at the expense of business value. Rather, organizations that are mature in terms of IT cost optimization will have identified and eliminated unnecessary levels of complexity. These unnecessary levels of complexity are areas where complexity adds no value to the enterprise.

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.

 

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