The Cost Reduction Roadmap for IT

To help IT executives identify "hidden" areas for cost reduction, Cutter Consortium Fellow Bob Benson has developed a Cost Reduction Roadmap for IT that applies time-tested portfolio management principles.

Advice on how to approach IT cost reduction is regularly featured in many IT journals. That advice usually centers around ideas like renegotiating vendor contracts, offshoring, and deferring upgrades. Deferring systems development projects is yet another way companies attempt to reduce costs. But, unfortunately, most organizations have already gone down these roads. So what's next? How can substantial cost reductions be found in IT?

What's Unique about the Cost Reduction Roadmap?

Most organizations have previously done IT cost reduction exercises. Many have also implemented portfolio management. So what's new about the Cost Reduction Roadmap? The answer -- it's the practical and effective combination of experience and methodology:

  1. The roadmap covers all areas of the organization's IT costs.
  2. It connects the IT costs to the organization's strategies.
  3. It takes the business perspective, with business management's input.
  4. It applies service, quality, and risk factors.
  5. The Roadmap uses what has already been done in the organization, whether in portfolio management, or in IT cost identification.
  6. It smoothly addresses multiple business areas and business units.

With these factors, the Cost Reduction Roadmap is a powerful methodology that brings real insight about cost and opportunity to the business and IT management teams.

Cutter Consortium offers a simple, two-step method to significantly reduce IT cost:

  • Phase 1: A one-day overview of your organization's current IT budget and related IT management processes.

    Outcome: You'll have a statement of a practical approach to achieve cost reduction opportunities and the roadmap (plan) for achieving them. The roadmap focuses on both the IT project budget and the total ongoing IT spend.

  • Phase 2: Implementation of the roadmap recommended actions for cost reduction, as identified in Step 1. Depending on the size of your company this can take 3-10 ten days.

    Outcome: For most organizations, implementing items uncovered by the roadmap can produce a 10% reduction in IT costs.

IT Executives Need a Roadmap to Cost Reduction

To help IT executives identify "hidden" areas for cost reduction, Cutter Consortium Fellow Bob Benson's Cost Reduction Roadmap for IT applies time-tested portfolio management principles. This simple roadmap has proven to be an effective framework for IT cost reduction, addressing both project budgets and ongoing IT expense budgets.

The Cost Reduction Roadmap for IT establishes the cost reduction framework:

  • What are all the services that IT is providing?

  • What are all the costs associated with these services?

  • How do the costs compare with the value delivered and current performance of those services?

The cost reduction framework works by assigning 100% of IT costs to one or more IT services. No cost is excluded. In this way, the Cost Reduction Roadmap results in three fundamental categories of cost reduction opportunity that bubble to the surface:

  1. Higher costs than expected. Uniformly, executives are surprised at how much certain applications, infrastructures, or services cost. This immediately leads to initiatives to either abandon/replace the unexpectedly high-cost applications or infrastructure services, or to take immediate steps to reduce the costs of those services.
  2. Unnecessary costs. Our experience is that the exercise of assigning all cost centers to applications/infrastructures/services surfaces important questions about costs. The fact is that if you're uncomfortable assigning a cost center to a key application, it's most likely that you're incurring unnecessary costs.
  3. Cadillac-level services. Applications and services can be running wonderfully -- at a high cost of support. Not everything needs to run perfectly, so balancing service and cost is critical to effective cost management.

The Engagement

Cutter's Cost Reduction Roadmap for IT engagement provides you with very experienced, third-party perspective to help you break through the political barriers and find where the really meaningful cost reduction opportunities lay. Cutter Fellow Bob Benson has decades of history helping organizations worldwide understand -- and act upon -- the opportunities that IT prioritization frameworks such as the Cost Reduction Roadmap uncover.

The Cost Reduction Roadmap for IT engagement is accomplished in two phases. First Bob Benson performs a one-day evaluation, at the direction of the CIO or CFO, to establish the framework as described in the previous section. This session (Phase 1) will identify the key areas of cost reduction opportunities and lays out a roadmap for finding and acting on them. At the end of the day, company management will be able to determine whether it is useful to go on to Phase 2.

Start Uncovering Cost Reduction Opportunities Right Away

For more information or to schedule a Cost Reduction Roadmap for IT engagement for your organization, contact us at +1 781 648 8700 or sales@cutter.com.

Cost Reduction Roadmap for IT

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