Funding Innovation by Reducing BAU Expenses

At a recent CIO Magazine event in Boston, CVS Caremark CIO Stephen Gold talked about innovation and how to accelerate it, as well as one of his key aims – to fund innovation by reducing his company’s business-as-usual (BAU) expenses. That certainly struck a chord with our team, because it’s something we’ve heard repeatedly in the marketplace.

IT budgets are increasing – almost nowhere. In fact, Gartner predicts a 2015 decline of 5.7% on average in IT dollars, with spending on enterprise software dipping 1.2% and IT services dropping 4.3% (the biggest drop comes in communications services with a projected 7.2% decline). Why? Gartner attributes the drop to competitive pressures and SaaS, going on to say, “Increasingly, buyers prefer solutions that minimize time and cost of implementation, driving demand for more efficient delivery methods, out-of-the-box implementation, and lower-cost solutions.”

A technology explosion. At the same time, Gartner says that there has been more technology change in the last three years than in the last 20 combined. Cloud, mobile, big data, and a host of other new digital technologies are transforming the marketplace – and your business units are demanding it to stay competitive.

These two facts seem to be at odds with each other. But are they really? What are firms doing?

Pay for it by reducing BAU expenses. With shrinking wallets, there is really only one way to fund the transformative technology that your businesses need. CIOs are finding they need to make space for it within current IT budget constraints. There is simply no other way.

With budgets for enterprise software and services flat or declining, CIOs are looking at several questions in order to make space – both staff time and money – for innovation projects:

• How can my team do more with the same (or fewer) resources? Can we increase the velocity of project deployments and deliverables with the same staff? What can we do to accelerate projects and lower IT maintenance effort?
• Where can we gain efficiency and eliminate manual tasks? This will let us re-deploy the dollars we would have spent on labor in ways that drive innovation.
• How can we increase the “predictability” of IT? What can we do to eliminate costly project over-runs and delays, as well as drive out the cost of unexpected events and software glitches in our enterprise apps? In other words, more on-time, on budget deployments with higher first-pass quality. Why does that matter? Because greater predictability will help your team run “closer to the line” as it becomes more comfortable with smaller project contingencies in time and budget. That frees up resources for other things – like innovation.

Automation cuts costs, frees staff, and shortens project timelines. And that means automation can help with all three of those hard questions. The kind of automation we’re talking about replaces manual labor with digital labor in the areas of business process validation, functional testing, and quality assurance. The reason it can have such an enormous impact on the IT bottom line is that these tasks touch every IT project, every innovation, and every software maintenance activity for SAP, Oracle, Salesforce, websites, and other enterprise apps.

By the numbers. Industry analyst IDC performed a survey of large companies and quantified the significant benefits of this sort of automation for global enterprises. Here are the findings:

• Reduced staff time spent on quality assurance by 48%, saving an average of 54,844 hours per year
• Decreased productivity losses from defects entering production environments by 44%
• Sped up test cycles by 39%
• Accelerated the time-to-market for application projects by 5.3 weeks on average
• Boosted quality by covering an average of 317 end-to-end business processes per enterprise with automated functional testing

Plus, automation initiatives broke even in less than 12 months, and earned businesses an average NPV of $13.59 million over five years. It’s a no brainer.

What could your team do with 50,000 extra hours? What if test cycles were 39% faster? What if you could shorten each technology project by 5 weeks? How would you spend that extra $13 million?

I surely don’t know. But you might have more space in the budget to innovate.