Enterprise Cost Optimization: Strategies for CIOs

Finding the right balance between investing in innovation and optimizing costs is a tricky task for a CIO, as there’s no “one-size-fits-all" solution. Cost optimization and innovation are not competing priorities but two separate points on an organization's continuum of technology consumption. 

When an organization starts to consider new technology to become more innovative or achieve digital transformation, that new technology should be aligned with the organization’s strategic or tactical business goals. Additionally, the expected return on investment, both soft and hard costs, should be defined before implementing the new technology. 

After an organization has consumed a new innovative technology or undergone a digital transformation, there should be an ongoing process to evaluate whether the technology is providing the expected ROI and if activities can be taken to optimize the costs of using that technology. 

CIOs, IT, and ROIs  

Kris Bliesner, CEO of Vega Cloud, points out savings from cost optimization efforts are rarely given back to the business -- enterprise CIOs typically use these savings as a mechanism to fund more cutting-edge development and innovation within their organization. 

“Rather than looking at them as diametrically opposed, they are very symbiotic concepts,” he says in an email interview. “Rate optimization in general is not workload-specific so all workloads can benefit from things like savings plans to reduce costs.” 

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He points to the FinOps Foundation as a source for best practices for doing just this. The three-phase approach begins with understanding the organization’s current spend, drivers, and effective savings rate. In the second phase, the CIO identifies opportunities for optimization among critical cost driving workloads, and in the final phase, uses software and automation to drive optimization outcomes. 

“By understanding your unit economics and then optimizing your spend you can then leverage those same data and analytics to complete the picture and grade how well your efforts are paying off on the optimization front,” Bliesner says.  

Strategy for Cloud, AI  

Scott Wheeler, cloud practice lead at Asperitas, explains in an email interview that the No. 1 strategy for prioritizing spending-intensive areas, such as cloud and AI, is to ensure that the spending is aligned with the value from a cost and business strategy perspective. 

“Every initiative should have a well-defined budget reevaluated quarterly to ensure the technology initiatives align with the business value,” he says. “With new technologies, they are often assumed to solve every use case.” 

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An example is the technology industry’s infatuation with large language model (LLM)-based AI solutions. 

Wheeler says that often a more straightforward solution, such as a machine learning AI solution, would be a better and more cost-effective solution to solve the business need. 

Matheus Dellagnelo, CEO of Indicium, says CIOs should perceive projects with a positive ROI as investments rather than costs. “Accurately assessing the impact of each project and data product is vital for justifying the required investment,” he explains in an email interview. 

Dellagnelo says that when discussing AI-related technologies in the context of cloud computing, it’s imperative to emphasize the correlation with data. He explains a well-organized data structure, or data platform, coupled with the right methodology, lays the foundation for effective AI solutions. 

“Quality data is paramount, and achieving it necessitates a modern platform,” he says.  

Dellagnelo adds understanding the implementation process is crucial, ensuring that the right methodologies, parameters, and training approaches are employed effectively. 

Utilization of tools like dbt, Snowflake, Databricks, fivetran or h2o can help to facilitate various aspects of data management and analysis. 

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Fostering a Cost-Conscious Culture  

Anthony Loss, director of solution strategy at ClearScale, says navigating organizational challenges requires CIOs to lead by example in championing cost-consciousness, demonstrating the business value of efficiency initiatives through clear communication and success stories.  

“Implementing training programs focused on cost-effective practices can cultivate a shared understanding of financial stewardship,” he says. 

Fostering an environment where feedback and innovative cost-saving ideas are encouraged can drive a culture of efficiency that supports business growth and competitiveness. 

Dellagnelo says the success of a CIO lies in their ability to rally stakeholders around the necessary actions. 

“While it may not be an easy path, it's the path that must be taken to steer the organization toward growth and competitiveness,” he adds.  

By effectively communicating the importance of investing in initiatives that promise ROI, a CIO can foster a culture of innovation and ensure the organization remains adaptable and forward-thinking in a dynamic business environment. 

“The key here is on the psychology side of things,” Bliesner says. “We need to change the behavior of engineers and to do that effectively you need a reward-based program -- think carrot versus stick.” 

He suggests rewards for top savers would help drive recognition for a job well done and ensure others in the organization understand the importance of costs and effective spending.  

From Wheeler's perspective, communication and alignment to common metrics are the two most important actions in fostering a culture of cost-consciousness and efficiency. 

“Often, an organization's strategic objectives are not shared; when shared, no information is provided on how IT activities align with those objectives,” he says.