Methods to be More Cost Efficient
Authored by Frank Liberio
No one likes cost cutting,
it is probably the worst part of the job of being CIO. There are always a bunch of reasons why we need to reduce our budgets. Good example of this are the business is just not doing well and all functional departments are being asked to reduce. Sometimes it is a cost reduction necessary to fund new initiatives that will better drive sales or increase profitability. Regardless or the reason, below are some areas in which you can look to find savings.
The first target is likely going to be your system integrations or third-party development suppliers. We are all at different levels of utilization of third parties but for the most part I have not met a CIO not using third party suppliers. As you look across the landscape of the suppliers, when was the last time you standardized the rate card across those suppliers? If you have not reviewed the various rate cards you will likely find a high variance in what you are paying for an application developer, PM or BA. Standardizing the rates will likely bring you a significant savings.
Staying with our third-party partners, we also sometimes keep adding more and more suppliers to the list of approved vendors. Now in the last step you were able to standardize the rate card, but the fractured usage of third parties means you are not getting any economies of scale. It is amazing at the reductions you will see in the rates when you offer to double the volume of work that you are offering. Also, the supplier knows that they are now in a race with the competitors to get more work or lose the work they are currently offering. If you have more than 3-5 third-parties working in your organization, you leaving money on the table.
Many of us have already optimized our infrastructure spend, but if you have not it is a large opportunity. Let’s face it, infrastructure is now a commodity type service that we get from our internal teams. If you are being asked to cut costs, it will make sense to look at whether you can bundle and then outsource a chunk of your infrastructure team. Do you really need an internal help desk, desktop management team or monitoring team? These are great areas to outsource and likely get 20-30% savings. If you have not updated your hosting contract in a few years, I would also take a look at that. The hosting providers are getting more competitive. There are more providers out there to pick from and they are losing share as we move workloads to the cloud. Lastly, movement to the cloud could bring in savings. If your data storage costs are not going down, you are not doing your job.
This next one is not great, but it is something to look at. The longer we work with our teams the more folks we promote into roles that maybe don’t make sense. Then instead of fixing the problem we caused let those bad promotions languish. As a result, I would take a look at your spans and layer and decide if you could reduce the leadership levels. I am not suggesting you cut too deeply because I think we all have a need for strong leadership in IT. However, if you have not assessed your organization levels, it probably requires a tune up and can likely yield savings.
The longer-term play to become more efficient is to change your development methodology. Moving to some form of agile with devops is supposed to give you more speed and efficiency. However, in some cases it also requires an architecture change and modernization of your legacy portfolio to truly achieve a pure agile approach. I would suggest moving to a hybrid approach of agile as quickly as possible in an attempt to get some speed and efficiency from the move. In the longer term, you can then make the necessary architecture changes to become fully agile.
Lastly, I think we need to also push some of the tough decisions on IT investment back to the business. If our capital and G&A is limited then how it gets utilized should be a business decision. Create the list of initiatives that are being requested from IT from across the business and I would suggest even take cut at prioritization with your team. The list should include a brief description of each initiative, the potential timing, and then the capital and G&A required. As you add up the costs, at some point you will run out of funding and that is where you draw the line. This analysis should them be brought to a cross-functional governance team made up of your C-suite partners. It is then up to them to confirm the priorities and to then decide where the line is drawn.
If you are going through a cost reduction, my condolences, it is not fun. However, know that is a reality of your position as CIO and we all go through it at some point. I would suggest be transparent with your leadership team and solicit their help, they will have a bunch of great ideas. Then you have to just gut through the process.