Six strategies for reducing costs and ensuring business value
Industry surveys have shown the average enterprise spends up to 80 percent of its budget on maintaining existing applications and infrastructure (September 17, 2003). These costs are continuing to grow. The industry is aware of this challenge, and is working to deliver solutions that automate many critical and time-consuming tasks. Yet every IT organization must also address the major sources of cost and complexity in their unique environment. By optimizing infrastructure and operations, you can spend less on maintaining the status quo, and more on new projects and initiatives that deliver direct value to your business.
This article identifies six key strategies for IT optimization. Together, they can put your organization on a path toward continual optimization that delivers better and more measurable business value and lower total costs.
1. Compare your IT spending with industry norms
Though every business has unique requirements and challenges, IT benchmarking can provide new insights and an essential reality check on internal assumptions. Initial efforts can focus on comparing costs and service levels, yet it is also important to understand operational practices and trends. Monitoring the approaches of other IT organizations can help you find the right balance between cutting edge innovation and proven strategies.
2. Move toward better alignment with business goals
IT is maturing, and a new level of business sophistication is required. Technical decision-makers must work closely with their financial and business counterparts to accurately model, measure and understand the cost, value and risk associated with all major IT investments. Formal methodologies, such as the Balanced Scorecard, Total Quality Management (TQM) and Six Sigma, are bringing new rigor to this task. Such tools can provide a quantitative business context to help you reduce the risk inherent in subjective decision making.
Another critical step is to establish service delivery as a fundamental IT metric (Figure 2). This establishes a quantitative link between key business processes, the IT services they depend on, and the underlying infrastructure of platforms, applications, networks, etc. It helps to bridge the traditional communications gap between IT and business decision-makers, providing a common framework for understanding IT expenditures and the business value they deliver.
3. Move toward enterprise standardization
The traditional “stovepipe” approach to deploying and managing major applications remains one of the leading sources of IT cost and complexity. In a worst case scenario, every application is optimized for performance and TCO as an isolated entity, with no regard for consistency. The result is a patchwork of management tools, consoles and databases, complex integration, diverse processes and skill sets, and poor resource utilization.
The solution is to promote cross-organizational communication and to establish enterprise-wide standards for IT infrastructure and processes. Clear standards provide development teams with a menu of optimized design patterns, platforms, configurations, architectures, tools and services that reduce the need to reinvent the wheel. They also provide a simpler and more consistent environment for consolidating systems, management tools and processes.
The first step is to take stock of your current environment. How many different databases, operating systems and backup and recovery solutions are actually deployed? How many custom applications, management tools, drivers and interfaces? What development tools are used, and how often are design elements reused to accelerate development and increase consistency?
The answers to such questions provide the foundation for moving toward a simpler and more standardized environment, with a limited number of design patterns and consistent architectures, configurations, components and services.
4. Emphasize manageability in all new investments
Establish a centralized IT team that focuses strictly on infrastructure simplicity, consistency and manageability. These considerations should become an integral part of new solution development. In simplest terms, every departure from enterprise-standard technologies and processes carries a higher price tag, not only during development and deployment, but over the entire lifecycle of the solution. Business and IT decision makers must work together to define clear standards and justify exceptions based on cost breakdowns and business value.