Successively administering your IT organization to perform like a business is an expectation all organizations require. Can you say with confidence that you control IT costs and transform your business simultaneously? One of the most exorbitant cost centers in business is the technology center.
In today's volatile economy, some businesses struggle to keep expenditures at a minimum. Most organizations thrive based on IT's performance capability. With the countless number of services provided, IT is centric to the organization by nature of the infrastructure required to support business operations; beyond that, the investment in time, money and staff to maintain current operations and forward-looking strategies affect the bottom line. Effective governance processes are essential to control IT costs, optimize decision-making and prioritize IT investments. How does your IT organization need to change and adapt? Are you really effectively leveraging technology across the enterprise?
Lakisha Simmons, Ph.D., a prominent assistant professor of management information systems at Belmont University, says that "IT organizations are under immense pressure to process varied and vast data and to publish the information in a ready-for-decision-making form." She goes on to say, "To be really competitive in today's marketplace requires an organization to not only make continuous predictive decisions, but also rapid decisions out of the mounds of structured and unstructured data."
Budget pressures have always existed in IT -- they have the responsibility and accountability to show value for the benefits provided. The business is (or should be) continuously seeking simpler, cost-saving solutions in expectation that IT delivers premium services with as few resources as possible. The IT manager's obligation is to justify the budget through variance reports and business cases, and to focus on project priorities. One way of proving cost transparency is benchmarking or issuing a "period to date" metric of variances or inefficiencies in spending.
The IT leader qualifies and quantifies new opportunities to trim IT costs. While budgets and plans are usually set for a time frame, leadership must be able to adjust priorities, researching and developing opportunities to streamline processes and incorporate proven technologies into the business.
Experienced IT managers are experts, and as such, they should have the tenacity and endurance to look at fixed costs, capital expenses and approved projects for the coming year. These costs must coincide with a long-term plan based on business direction. You need to make strategic shifts so your cost structure is more transparent. Making the IT environment a profit center requires inherent leadership capabilities to adapt management practices as rapid technology transformation unfolds.
Simmons suggests, "The governance and budget decisions really come down to the business model at hand. Yahoo, LinkedIn and Twitter create revenue out of customers using their proprietary software as a service. Software enables so much of a company's competitive advantage it's difficult to cap it at a dollar amount. Plus, the cost of data is so low, why would you want to?"
Seven competencies and questions that a reputable IT leader should ask:
- Best practices: What are the proven practices to optimize IT spending? How do you prioritize your IT spending? You will need to balance long-term imperatives with pressing short-term demands.
- Risks: How will you mitigate the risks of traditional IT cost optimization practices? You need to explore new strategic levers while maintaining an eye on future growth.
- Innovation: Are you engaging the business?
- Accountability: This is more important than cutting costs; by baselining your budget on an annual basis and tracking key metrics, you show that you can manage the many facets in IT. How are you holding yourself, your team and others accountable for delivering savings?
- IT performance management: Some organizations use departmental scorecards (goals, objectives and targets) to measure performance -- do you?
- IT service portfolio: What IT services do you offer? Do you need to dismantle legacy systems? Should you rationalize your application portfolio?
- Shared services: Will shared services with external providers result in higher IT costs or allow you to cut costs?
Effective IT leaders must turn their attention to accomplish financial stability using efficient techniques. Here are eight proven strategies to ensure your return on investment:
- Risk posture: Look within -- take stock of the departments' strengths, weaknesses, opportunities and threats. In turbulent times, measures and metrics can be leading indicators of progress and enable improvements, ensuring customer satisfaction and a healthier stance for your business.
- Staff enrichment: Empower employees through training and education programs and make them accountable and responsible for cost containment.
- Business process reviews: Albeit time-consuming, this is a mandatory practice. Select several critical tasks each year and enroll a cross-functional team to review end-to-end activities that could be streamlined to save resource hours or potential hardware and software dollars.
- Augment staff and technology: With focus on your core functions, research capabilities to use outside service providers to handle complex and time-consuming efforts that may require higher expertise, so that existing staff can handle projects and day-to-day operations (consider managed services, cloud providers, automation techniques, etc.).
- Software/application portfolios: Do you have a centralized, complete inventory of what software that IT services, including off-the-shelf and self-developed business tools? Do you have an understanding of what the terms of the purchase and maintenance agreements or lease arrangements are? Do you have more or less than what you need? Having a standard system and approach helps with release levels, change control, product integration, budget planning, implementing newer technology and general IT support.
- Asset management: Do you have a centralized, complete inventory of what hardware or infrastructure equipment you support or service? Do you have an understanding of what the terms of the purchase and maintenance agreements or lease arrangements are? Do you have more or less than what you need? Having a standard system and approach helps with firmware levels, change control, budget planning, implementing newer technology and general IT support.
- IT procurement: Do you have and use policies and procedures to negotiate, acquire, install, inventory, depreciate and dispose of assets owned by the organization? Are you getting the best prices and terms for your IT purchases? Utilizing these practices will find you hidden dollars that affect the bottom line.
- Financial and business analysis: A preferred way to budget is to zero baseline line items each year; for each expense code add in approved baselines for the new year (carryovers, or recurring fees), then add to baseline (new agreements, purchases, etc.). Include justifiable and approved capital requests, and then submit for approval. Once obtained, conduct monthly financial variance reporting, along with project assessments and strategic planning assumptions.
No doubt each one of these requires time to develop and communicate. Do solutions research and make available resources to sit at the table to establish targets. Making each one of these a standard practices can guarantee customer satisfaction and business serviceability.
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