by Paul Daugherty

Using new technology to tackle the old cost cutting challenge

Nov 13, 20124 mins
Cloud ComputingIT LeadershipIT Strategy

It’s budget season for many CIOs and already the scars and bruises are showing. Over the past few years, they’ve jousted with finance to try and defend their budgets, even as the demands on IT continue to grow.

Analyst house Gartner said in its Q3 forecast for IT spending that growth is still positive, but has just been trimmed to 1.7 per cent, down from three per cent. And despite this nominal expansion in spending, IT is supporting a growing number of projects—from social media tools for marketing, through to cloud-based CRM for sales.

More fundamentally, as a survey from the Society for Information Management highlights, there is also a growing expectation for CIOs to be driving “revenue-generating IT innovations”. This is now a top-five priority, for the first time in the survey’s 14-year lifecycle, up from 17th on the list just two years ago.

Cost reduction: old problem, new solutions

Despite all this, IT costs remain in the spotlight, with CFOs still looking to CIOs to find ways to save money.

But there is at least some good news: a plethora of new tools from recent years including, cloud computing, software-as-a-service (SaaS), improved collaboration technologies, better virtualisation, and so on, all of which can help tackle costs.

These play a role across all four waves of IT cost reduction. At the same time, they are also helping to optimise the company for future growth and flexibility.

  • Wave 1—revisit short-term cost reduction opportunities

Any CIO worth their salt has long since put a tick in the “quick cost wins” box. From renegotiating outsourcing SLAs to reviewing out-dated software licences, it’s easy to assume that there is little left to gain. But as some are finding, rapidly evolving technologies can reopen the door to quick savings.

Take BBVA, the global financial services group, for example. It is moving its 110,000 employees to Google Apps for Business, helping transform its business operations and support its wider technology innovation strategy. All while trimming IT costs.

  • Wave 2—optimise IT for greater efficiency

Similarly, most CIOs push hard to get more out of their IT systems. But once again, new tools are giving new options to consider that are often overlooked.

Here, the focus is on better aligning IT with the business, through service catalogues, better IT asset management, and improved process management and automation, to name just a few. All these can bolster IT efficiency.

And beyond that, there’s more to consider: by virtualising, standardising, consolidating and centralising systems, for example, or by switching to greater use of the cloud and SaaS.

  • Wave 3—Re-architect IT for efficiency

By the third wave, things start to get interesting. Here, CIOs can start to prepare IT for tomorrow’s challenges—from increased employee mobility, through to the need to support a diverse range of personal devices entering the workplace.

Cost-effectively managing this requires a careful analysis of the entire IT systems landscape. Applications have to be readied for the cloud, while legacy tools have to be rewritten for a mobile workforce.

This is hard, but those who get it right today will have put in place a platform for what is potentially the biggest cost-saving wave of all.

  • Wave 4—drive IT-enabled business value

CIOs now have the right foundation in place to help cut costs out of the rest of the business far more effectively, while also transforming the effectiveness of various functions.

As a result, it is now far easier for CIOs to achieve a range of goals. Just a few examples include:

  • Automating business processes and various user interactions.
  • Implementing user self-service, such as for standard HR processes.
  • Supplying management data or key performance indicators as needed.
  • Delivering services—anywhere, anytime, and across any device—as the workforce gets more mobile.

As this all suggests, this wave is where the potential for IT innovation starts to really emerge, even despite the IT cost pressures.

More fundamentally, it puts CIOs in the right place to adapt as the firm’s business model shifts to reflect changing market realities.

About the author:

Paul Daugherty is Accenture’s Chief Technology Officer and also serves as managing director of Accenture’s Technology Strategy and Innovation group. With these roles, Daugherty is responsible for Accenture’s technology innovation and growth agenda. He oversees Accenture Technology Labs, Accenture’s Cloud and Mobility businesses, and groups that incubate emerging technology capabilities. Daugherty also is responsible for Accenture’s pool of deeply skilled, certified technology architects.