How to reduce IT costs by focusing on commercial challenge

Louise McCarthy, a transformation CIO who has worked with HMRC, Aviva and Specsavers CIO Phil Pavitt overseeing successful business transformation programmes, explained in an article about the need for commercially-savvy IT professionals a nine-point guideline for reducing IT costs. [See also: Commercialising the IT department - Why CIOs need to employ commercially savvy IT professionals]

Here, McCarthy notes the essential common practices shown by teams that focus on the IT commercial challenges:

  • Make the CIO the champion of the initiative.
  • Continuous commercial awareness training and education.
  • Continuous reviews of suppliers contracts.
  • Challenging suppliers to provide innovation and cost reduction.
  • Empowering every IT resource to challenge each other and suppliers via a governance framework and performance management.
  • Creating a IT commercial and performance function overseeing the activities, driving ideas, and measuring success and driving innovation strategies.
  • Leveraging key IT staff in (not only IT leaders), linking to personal performance management framework.
  • Motivating IT leaders and staff to effectively manage costs.
  • Setting targets and cost-saving initiatives with defined end and start dates.
  • Engaging with the business leaders to identify ways of using IT to reduce costs in the business.
  • Providing effective IT cost transparency, including detailed costs by resource, asset, contract, vendors and so on, to enable the creation of initial baseline costs and the tracking of actual savings.
  • Benchmarking IT spending against peers in order to identify areas to further optimise, and continuously scanning the marketplace to stay abreast of what other organisations are achieving.
  • Holding staff accountable for delivering against the targets.
  • Including cost optimisation targets in the objectives of each IT staff member.
  • Measuring the savings identified, meeting regularly to review and track successes and failures.
  • Celebrating success and encouraging continued participation.
  • Challenging suppliers for free investments.
  • Putting an effective progress report in place to measure progress and regularly reviewing and refining it at monthly meetings and as part of the budget/planning cycle.

Copyright © 2016 IDG Communications, Inc.

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