You’ve just been called into the CEO’s office for an important meeting. Your welcomed into the office and asked to take a seat. Your CEO says, the reason I asked you in today, is to discuss our IT strategy for next year. Specifically, I want to discuss our objective to reduce overall IT costs by 30% while maintaining excellent service levels and supporting our business growth.
Now, you think to yourself, this is completely insane. How can we continue to provide top notch support of the organization with a 30% budget reduction. In other words, how am I going to do more with less. If you are not prepared for this type discussion, then your best plan of action is to say you will go back and develop a plan of action achieving these new goals. Or, if you have reviewed this article and outline a plan of action in the likelihood this conversation every comes up, you will be prepared to discuss your strategy at this time.
Over half your IT budget is spent on staffing. Look at consolidating your distributed locations, data centers, call centers, repair centers, etc. Duplication of job functions is more difficult to manage, creates costly management overhead, and drastically increases staffing costs.
Standardize Processes and Platforms
Complexity and re-work is time consuming, risky, and costly. Standardization makes everything easier, including development, training, maintenance, and upgrades. If possible, standardize on development and management methodologies, processes, and templates to reduce training and improve productivity. Standardize on hardware platforms, business applications, operating systems, and desktops to receive volume discounts from the vendors.
Automate Manual Processes
Tools that can automate current manual processes like software distribution to desktops, IP address configurations, processing paper documents, etc. will save your organization big money in staff efficiency. This staff can be moved to other high priority projects performing more valuable services.
It is vital that you negotiate with your vendors. Never automatically sign a new contract once the current contract is up. Twelve to eighteen months before a contract is up, start discussing your needs with the current vendor and other vendors specializing in this area. Put together a Request For Proposal (RFP) and solicit bids from multiple vendors. Learn from your current or past contracts, demand specific service levels, include penalties for failing to meet performance goals, and always negotiate the price.
Outsource Specific Tasks
Investigate the outsourcing of specific tasks that are not business critical. Selective outsourcing can make your department’s activities much simpler, improve performance by concentrating on core critical applications, and reduce overall costs.
Are you ready to take action? Before jumping into your cost reduction strategy, you will need a plan of action. Identify your key priorities. Determine which areas will add the most value to the organization. Identify who should be involved. Which areas will you focus on first and when will the deliverables be complete. Determine your expected cost savings and then track these measurements over time.
By focusing on these five target areas you will have a great start on your cost reduction strategy.
Copyright 2006 Dennis Sommer