Many companies are striving to be more agile, efficient and productive in response to uncertain economic conditions in 2016. Capital projects have been cancelled while companies shift their attention to surviving in the current environment without hindering their ability to expand in the future. Functional areas are facing significant pressure to cut costs and "do more with less." Successful cost reduction or right-sizing efforts result in organizational realignment, process improvement and system changes.
Cost reduction initiatives will have a significant impact on IT. Not only will IT be asked to do more with less, but IT will also face increased demand to make changes to existing systems in support of functional area realignment. Forward-looking CIOs and IT departments should proactively focus on:
- Reducing costs
- Increasing efficiency
- Improving security
- Migrating to the cloud
The unfortunate reality is that companies are overpaying for IT services. The real challenge for a CIO is to perform an unbiased review of operations when identifying cost reduction opportunities. IT personnel will state that IT is already lean and cannot endure additional budget cuts. Cost reduction opportunities will be identified if IT starts by focusing on licensing fees, projects and personnel. None are easy to attack, but are areas that should be reviewed.
Companies pay maintenance on software that is no longer used. While initiatives to review software licenses and determine which maintenance fees should be discontinued are started, they are rarely finished. Personnel hate this exercise because it exposes rogue software purchases and raises questions about IT’s ability to control access to the technical environment. This is a worthwhile exercise given the potential savings that can be quickly identified. A similar exercise can be performed on existing hardware platforms, but may have a smaller benefit.
The IT steering committee should review all projects to determine which can be cancelled or delayed. Reviewing upcoming projects is easy if the right guiding principles are created and used. Only continue the projects that increase revenue, impact market share or support compliance. All other projects should be delayed. In-flight projects should undergo the same scrutiny, but may require more discussion.
Reviewing the IT organizational structure to identify cost savings is a difficult, yet necessary exercise. Most IT departments have grown along with the company without significant thought for optimal organization structure. When times are flush, it is easy to add personnel to plug gaps without determining the long-term impact on costs. Realigning the organization around a framework like COBIT 5 will help ensure business is properly supported in the long term.
IT and business should work together to determine how to better leverage existing systems to improve process efficiency. A quick review of trouble tickets can help IT develop an inventory of complaints where workflow, configurations and heavily modified code are hindering employees’ ability to perform day-to-day activities. A joint effort to change processes while refining system configurations can have a huge positive impact, sometimes leading to elimination of positions within the business.
Changing business conditions or processes could also lead to elimination of heavily modified code reducing the amount of effort required to support the system. Specialized external resources may no longer be needed to monitor and continually modify the code. Internal support resources could be redirected to focus on other areas that can increase business efficiency.
Extending the existing systems with new modules or add-on capabilities may be counterintuitive in a down economy. However, this is the perfect time to take a hard look at how new functionality can support revenue-generating processes. IT should work with business to ensure processes are rationalized, efficient and effective. Then determine if additional functionality is required to support the new environment. A strong business case could lead to implementation of new CRM, field service, asset management or other systems.
Improving IT security
IT breaches, no matter how minor, can lead to a significant expense. The consultant fees and data loss liability can quickly add up whenever a system breach is detected. IT can work with the business to increase employees’ awareness of cybersafety. Implementing new processes and awareness programs is tantamount to an inexpensive insurance policy to avoid the cost of a breach. Successful cybersecurity programs can also help reduce the need for expensive cybersecurity detection, penetration and removal tools.
Migrating to the cloud
Companies that have data center managed services contracts should take a hard look at migrating to the cloud. Many data center contracts were not written with clauses to reduce capacity if a company shrinks. As a result, companies are paying for more capacity and service than needed. Going through an exercise to determine the cost savings of moving to the cloud can encourage the managed services provider to reduce contract costs. If not, then moving to the cloud can often reduce the overall cost of running core systems. And moving to the cloud will help ensure IT’s ability to support growth in the future efficiently and cost effectively.
It is difficult to tell exactly what is going to happen to the economy this year. However, IT should get ahead of cost reduction activities, striving to be agile, efficient and productive.
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