In today’s marketplace disruptive technologies are emerging at lightning speed, and we all know firsthand that organizations are trying to move just as fast to stay competitive. This rapid pace of disruptive change places pressure on every member of the leadership team, in every line of business. In order to thrive, companies need to remain agile and leadership needs to find every advantage. In all of this, CIOs have a crucial role to play.
These disruptive technologies have also made the role of CIO more important than ever. No longer are CIOs viewed as simply being responsible for the nuts and bolts of IT or primarily focused on “keeping the digital lights on.” Instead, as CIOs harness the power of technologies such as IT Business Management, which helps define, govern and manage services that deliver business value, they are increasingly viewed as drivers of efficiencies and creators of value. They are taking the lead in digital transformation efforts, and as such, companies are looking to CIOs to navigate the changing technology landscape and keep their organizations on the road to success.
The changing role of the CIO
How fast is the role of the CIO changing? Insights from Gartner’s 2018 CIO Agenda Report (opens in new tab) finds that a staggering 95 percent of respondents said they expect that their job will change due to digitalization. While large, this number is not surprising.
As businesses place more importance on the role, CIOs are expected to increase the value created from current investments, as well as find ways to incorporate the latest technology. And prior to any implementation – as well as throughout the process – the value to the overall organization has to be demonstrated. This means creating – and showing – a return on investment (ROI), which can only be achieved if IT understands where its spend is going, and how costs can be optimized so that investments are being made in those IT services that are having the most impact of the bottom line.
Find cost optimization opportunities
According to a Spiceworks’ 2018 State of IT Report (opens in new tab), “most companies across the globe will be keeping IT budgets steady, or giving them a boost over the next 12 months. In fact, close to half of companies (44 percent) expect budgets to increase while 43 percent anticipate no change at all. Only 11 percent expect to see their budgets decrease.” The rising budget is a positive trend, especially given IT budgets have largely remained stagnant over the past few years.
However, no matter the budget, it is critical to get the most out of the money being spent in order to free up resources for impactful investments. For instance, a 2015 survey (opens in new tab) by Genpact Research Institute provides a rough estimate that says “all current digital efforts worldwide cost about $593 billion yearly.” $394 billion of that, however, are “spent on efforts that deliver insufficient ROI.” In other words, almost two thirds of digital spend is simply not delivering. Plus, even for the costs that are delivering value, if you can’t prove the value, it is hard to justify the spend to other business leaders.
How does a CIO get visibility into efforts that are not providing value, and place the focus on opportunities for delivering a real impact? A big part of the equation is using IT Business Management to optimize cost and uncover business value.
Look for costs which aren’t creating value
IT is complex, and often, unnecessary costs are difficult to uncover and correct. Here are four areas to look and questions to explore:
Waste: Do you have more than you need? Look for big and small costs – it all adds up. Quick wins for identifying waste reduction opportunities can generally be found with over-provisioned virtual machines, excess storage and software licenses.
Duplication: Do you have two or more of something that does the same job, without any justifiable reason? Some of the most common reasons you may have duplicates are as a result of mergers and acquisitions, decentralized IT purchasing and from not retiring incumbent tools and platforms after new ones are purchased.
Demand or Consumption: Are employees requesting, using or consuming more than they should? A longer-term play (but very successful) is to showback IT costs and consumption. One further step is to transfer IT’s budget to the lines of business and chargeback for services consumed. A quicker way to create consumption efficiencies is to limit the size of Virtual Machines available through self-service.
Old or Inactive: Are legacy IT services costing more to maintain that the value they deliver justifies? Easy wins with lifecycle management include email archiving / deletion and identifying old hardware that is on expensive extended maintenance.
Now the question is, how can you get this all done? While moving away from spreadsheets may seem overwhelming, the cost of sticking with the status quo is too great. Switching to a more sophisticated, centralized solution can help organizations deliver more business value from every dollar spent on IT. You may be surprised at the value that can be unlocked.
Create metrics to gain insight into the value IT creates
Like in any department, CIOs must create benchmarks to be able to measure their success – whether it’s to help inform future decisions, or to show the rest of the organization what benefit its investments are having on the rest of the transition. However, in IT, creating these metrics are much more complicated than it is for other departments such as human resources or engineering. This means in order to develop effective metrics, CIOs need to couple the latest solutions with tactics for best gauging IT value.
One of the most popular ways of measuring IT value is taking a look at spend as a percent of overall revenue. While easy to understand, it is too broad and doesn’t answer the important questions around how does spend impact value. Businesses need metrics that allows it to make better decisions, which means CIOs need to put metrics in place that are granular and uncover opportunities to enable real systemic improvement in the management of IT spend.
While there is no one size fits all metric (that would be too easy!), IT metrics around specific products or service delivered can prove to be very valuable in understanding IT value. For example, in the brewing industry the IT cost per barrel of beer could be calculated, or in healthcare, the IT cost per patient discharge is calculated, etc.
Accessing the necessary resources to get the job done
While creating true cost optimization doesn’t happen overnight, the process is a lot simpler with the right resources in place. By getting buy-in from the IT department and leadership, as well as having access to the right technology, such as IT business management solutions, CIOs are able to bring together all aspects of cost optimization – from uncovering unnecessary costs to creating metrics to uncover the value of IT.
It’s through this effort that CIOs can begin to properly manage costs, and gain the flexibility to explore additional ways to create value – whether its investing in the newest technology or finding better ways to use the technology in place.
Dale Quayle, CEO of Digital Fuel (opens in new tab)
Image Credit: Chombosan / Shutterstock