Gartner says CIOs should explore 10 IT cost optimization techniques to overcome budget constraints in a volatile business environment
When a business executive asks their CIO to reduce operating costs, together they assess their IT spending and what is driving those costs. They need to calculate how IT costs impact the delivery of IT services, as well as their effect on business costs and revenues.
However, they are unable to assess its impact on other business units (BUs) in the organization.
"CIOs who have successfully optimized IT costs have teamed up with other executives from other areas (business leaders) beforehand, particularly the CFO, to collaborate on corporate cost optimization initiatives."
CIOs can achieve cost savings within the information technology arena as well as across the organization by focusing initiatives on 10 IT cost optimization techniques.
Technique #1: Implementing Shared Services
Some CIOs need to leverage shared IT services across business units to drive economies of scale. For Gartner, many companies achieve cost savings and savings that can range from 15% to 20% of service costs in 18 to 36 months, and the biggest savings can amount to more than 25%.
Supporting business areas with good technology platforms, such as ServiceNow for example, facilitates the agility and ROI of a shared service center, as well as reducing costs.
Technique #2: Adopt a Cloud Adoption Policy
According to Gartner, opt for a cloud policy or cloud first offers features ranging from infrastructure as a service (IaaS) to software as a service (SaaS).
While many private and public sector organizations choose cloud services to increase agility, flexibility and scalability, they also experience cost efficiencies over time.
For cost savings, carry out strict cloud governance or risk seeing increases in infrastructure and application costs if governance is weak.
For this, the information technology area can support the business with governance through the implementation of CCOE Cloud center of Execellence or cloud center of excellence, bringing FINop best practices to the organization.
Technical support with the implementation of CMP platforms, Cloud Management platform, such as VMware CloudHealth, Snow Software Embotics and Morpheus data is the role of the information technology team, supporting the reduction of IT costs.
Technique #3: Consolidate Corporate Data Centers
As organizations expand their operations, the cost of maintaining a traditional data center will increase. This leads some IT organizations to move their data centers to hybrid cloud architecture.
In research by Gartner, it was found that through efforts to modernize and consolidate the data center, cost savings can vary between 10% and 20% of a data center budget, mainly enabling cost savings in new contracts with service providers , hardware, software and datacenter systems.
Technique #4: Rationalize and Standardize Corporate Applications
For Gartner, the portfolio of applications and systems represents a large part of an IT budget. CIOs who standardize and rationalize their application portfolios can reduce and control costs. Savings can range between 15% and 25% of the IT systems budget.
Technique #5: Improve IT Financial Transparency Practices
Gartner shows how important it is for companies to understand how IT services are being delivered and what the associated costs are for information technology operations (IT budget). Gartner refers to this as IT financial transparency, exercised by IT Executives.
Working closely with CFOs and the entire finance team to link accounting data with hardware, software and service assets (asset-based view) to technical costs and related costs for business services.
This transparency in corporate IT spending enables IT to deliver value to the business as a whole and optimize costs through IT services.
Costs with software licenses can be better managed with the implementation of good practices of SAM Software Asset Management or Software Asset Management.
Technique #6: Focus on spending IT demands for greater business cost optimization
According to Gartner, approximately 96% of corporate operating expenses occur outside of IT, which presents significant opportunities to reduce IT expenditures even in the short term.
By partnering with their BU peers across the organization, CIOs need to assess business processes, capabilities and capabilities to determine where IT can improve productivity, efficiency and effectiveness, thereby reducing overall spend.
Technique 7: Implement robotic process automation
Take advantage of technologies such as robotic process automation (RPA) and artificial intelligence (AI) to analyze and identify patterns that can be used to make strategic business decisions.
These technologies can identify new insights from data and automate or augment processes that are inefficient for humans to perform.
Technique #8: Assess IT Asset Management Practices
CIOs often ignore asset management capabilities and this oversight leads to increased IT operating costs. Gartner claims that shifting IT Asset Management (ITAM) responsibility from “tracking” individual assets to corporate governance of IT assets and technology can achieve cost savings from 10% to 20%.
The costs of IT assets, software contracts and software licenses can be better managed by implementing best practices in SAM Software Asset Management or Software Asset Management.
Technically support with the implementation of SAM platforms, Software Asset Management, for example Snow Software, ServiceNow and Flexera Software it is also the role of the information technology team, supporting cost governance.
Technique #9: Evaluate Digital Transformation Ideas for Digital Businesses
Invite business areas to contribute ideas for cost optimization or new technology applications (New Technologies). Share any savings generated from these brainstorming sessions with the BU and then potentially initiate a continuous reinvestment cycle (investment in IT), possibly with the savings found from improving IT governance.
Such a partnership can increase visibility into the BU's IT spend and mitigate redundant IT expenses.
Technique #10: Optimize the workforce
Basically, the management of workforce is a process for optimize the service of employees, managing the skills and productivity of employees to align them with the company's goals
Use features of cloud-based productivity applications such as process automations or virtual assistants for mundane and common tasks to reduce personnel costs. Implement bots to increase workers' capabilities and enable a more productive work environment.
"By determining which of the 10 techniques to prioritize, the organization can achieve short-term cost savings, while also considering institutionalizing IT cost optimization as an ongoing discipline"
Gartner, Inc. (NYSE: IT) is the world's leading information technology research and consulting firm focused on the IT market. Gartner, Inc, officially known as Gartner, is a global research and consulting firm providing information, advice and tools to leaders in the IT, finance, HR, customer service and support, communications, legal and compliance, marketing, functions. sales and supply chain functions.
Its headquarters are in Stamford, Connecticut, United States. The company changed its name from Gartner Group, Inc to Gartner in 2000. It is a member of the S&P 500.
Research provided by Gartner, such as Global Information Technology Spending and Digital Marketing, has historically targeted cios, senior IT, marketing and supply chain managers. The acquisition of CEB, Inc. expanded its range and breadth of offerings to support all business functions across all industries and corporate sizes.
Gartner's clients include large corporations, government agencies, technology companies and the investment community. Its customer base comprises over 15,000 organizations in over 100 countries. The company's products and services include Research such as global IT spending, Executive Programs, Consulting, relational content and Conferences.
Founded in 1979, Gartner has more than 15,000 employees located in more than 100 offices worldwide.
The Magic Quadrant or Magic Quadrant (MQ)
The Magic Quadrant or Magic Quadrant (MQ) is a series of market research reports published by IT consultancy Gartner that rely on qualitative data analysis methods to demonstrate market trends such as direction, maturity and participants.
Its analyzes are conducted for a number of specific technology industries and are updated every 1-2 years: once an updated report is published, its predecessor is “retired”.
Gartner's Magic Quadrants provide visual snapshots, in-depth analytics, and actionable advice that provide insight into a market's direction, maturity, and participants.
The Magic Quadrants compare vendors based on standard Gartner criteria and methodology. Each report comes with a Magic Quadrant chart that depicts a market using a two-dimensional matrix that evaluates vendors based on their completeness of vision and ability to execute.
Ranking by Gartner's Magic Quadrant
Gartner ranks vendors on two criteria: completeness of vision and ability to execute:
Vision and Strategy
It reflects vendor innovation, whether the vendor drives or follows the market, and whether the vendor's vision for the market will evolve as per Gartner's perspective.
It summarizes factors such as vendor financial stability, market responsiveness, product development, sales channels and customer base.
These component scores lead to a supplier position in one of the four quadrants below:
Providers in the Leaders quadrant have the highest scores for their vision and ability to execute. A supplier in the Leaders quadrant has the market share, credibility, marketing and sales capabilities necessary to drive acceptance of new technologies, ie, a trendsetter.
These vendors demonstrate a clear understanding of market needs, are innovators and strategic leaders, generating the perspectives their customers will use when designing their infrastructure and strategies. In addition, they have a presence in the top five geographic regions, consistent financial performance and broad platform support.
A company in the Challengers quadrant participates in the market and performs well enough to be a serious threat to suppliers in the Leaders quadrant. They have strong products as well as sufficiently reliable market position and resources to sustain continued growth.
Financial viability is not an issue for vendors in the Challengers quadrant, but they do not have the size and influence of vendors in the Leaders quadrant.
A vendor in the Visionaries quadrant offers innovative products that address large-scale operational or financially important end-user issues, but has not yet demonstrated the ability to capture market share or sustainable profitability.
Visionary suppliers are often private companies and are typically acquisition targets for larger, established companies. The probability of acquisition often reduces the risks associated with deploying your systems.
Niche Manufacturers (niche players)
Vendors in the Niche Players quadrant are often focused on specific market or vertical segments. This quadrant can also include vendors that are adapting their existing products to enter the market under consideration, or larger vendors having difficulty developing and executing on their vision.
Gartner Critical Capabilities complement the Magic Quadrant analysis to provide a deeper insight into the products and services offered by multiple vendors.
The company was founded in 1979 by Gideon Gartner. Originally a private company, Gartner Group was first publicly launched in the 1980s, then acquired by Saatchi & Saatchi, a London-based advertising agency, and then acquired in 1990 by some of its executives, with Bain funding Capital and Dun & Bradstreet.
The company went public in 1993. In 2000, the name was simplified to Gartner. Gene Hall has been the company's CEO since August 2004.
In the course of its growth, Gartner acquired numerous companies that provide related services, including Real Decisions — which became Gartner Measurement, now part of Gartner's consulting division — and Gartner Dataquest, a market research firm.
It also acquired a number of direct competitors, Meta Group in 2005, AMR Research and Burton Group in early 2010, and Ideas International in 2012.
In March 2014, Gartner announced that it had acquired the privately held Software Advice for an undisclosed amount. In July 2015, Gartner acquired Nubera, the business app discovery network that owns properties like GetApp (a peer-review site), AppStorm, AppAppeal and CloudWork. Terms of the deal were not disclosed. In September 2015 acquired the peer review site Capterra, as in June 2016, Gartner announced that it had acquired the private company SCM World, based in London, UK, on January 5, 2017, Gartner announced that it had reached an agreement to acquire CEB, Inc. in a cash and equity deal valued at approximately US$ 2.6 billion.
As of March 2017, Gartner announced that it has agreed to purchase New York-based L2 Inc, which specializes in benchmarking the digital performance of brands. Terms of the deal were not disclosed.
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