Why You Should Be Optimizing IT Costs Monthly

Organizations worldwide have begun trending toward the management of their enterprise Information Technology (IT) spending with an eye on implementing cost optimization ideas as an ongoing process. Research shows this practice gives organizations more control over their IT spending, generating more accountability and realizing long-term cost savings that still allow organizations to work toward innovation investments.

Be Proactive, Not Reactive

In the past, organizations tended to only consider and pursue IT cost-reduction actions as an answer to a problem. Then, once fire had been put out and the necessary cost savings recognized, they would resume business as usual—until another financial issue arose further down the road. Now, organizations are seeing the benefit of embracing a more disciplined approach to cost optimization.

Organizations are better off continuously and proactively pursuing cost optimization activities and opportunities, rather than reactively and hastily pursuing one-time cuts to meet certain budgetary goals and accidentally choosing to cut costs that actually hinder the organization’s long-term success.

Rely on the Experts

Establishing the suitable level of enterprise IT spending that simultaneously maintains business processes while also allowing for investment into innovation and new technology must come from the top down. Chief Information Officers (CIOs), or your organization’s equivalent, should be proactively communicating with their Chief Financial Officers (CFOs) and other leadership to develop a systematic methodology for:

  • Setting targets

  • Choosing initiatives

  • Implementing cost optimization activities, including managing telecom expenses on a single platform.

Steps When Prioritizing and Pursuing Cost Optimization

International research company Gartner outlines five steps or focus areas for companies to prioritize when pursuing cost optimization: Strategizing, evaluating, executing, optimizing and managing.

Interdisciplinary Teams

One of the first steps you can take is establishing a team that includes both IT leaders and business unit leaders to focus on cost optimization and telecom expense management. Depending on your business and personnel, these teams can be structured formally or informally, though they should be interacting and strategizing regularly.

Empirically, teams have functioned well when the CIO was championing the initiative and an IT leader was overseeing the cost optimization program. Leveraging other IT staff throughout the organization and motivating them to effectively optimize costs is also important.

Together, the teams can set targets and establish specific initiatives to meet those targets. Initiatives and activities should have defined start and end dates, then teams can meet regularly with business leaders and other IT staff to review and track their progress after implementation, taking note of both successes and failures. While encouraging participation and celebrating success is beneficial, CIOs and other team leaders should continually benchmark the organization’s IT spending against industry peers to identify additional areas for optimizing costs.

Transparency & Ability

In the name of transparency and accountant ability, cost optimization teams can develop effective progress reports that are regularly reviewed and refined during monthly or quarterly budget/planning cycles. Documenting a given cost optimization activity from start to finish allows the team to accurately evaluate whether the cost savings they anticipated were actually realized.

The Six Dimensions of Strategy

Ideally, when strategizing with business stakeholders and IT consultants, cost optimization teams should be considering all ideas for potential projects or actions along six dimensions, including anticipated financial benefit, business impact, time requirement, degree of organization risk, degree of IT technical risk, and investment requirement.

Prioritizing Projects

Ideally, you would prioritize activities and projects that have a significant potential financial benefit, positive impact on business operations, low degree of organizational risk, low degree of IT technical risk, and low investment costs. The goal should also be implementing cost optimization ideas and activities that yield savings for the organization within the shortest time possible, according to Gartner’s Decision Framework for Prioritizing Cost Optimization Initiatives.

Not all projects may fit those dimensions in such a positive way. At times, ideas could require a moderate, upfront investment before savings can be realized but will still significantly improve cash flow and generate either hard or soft savings without staff reductions or critical changes within the organization. The important part is objectively evaluating ideas within this framework to make the most informed decisions about which initiatives to pursue and whether they are viable.

Telecom Expense Management

When it comes to enterprise IT spending, ongoing cost optimization and telecom expense management empowers companies to act in a controlled, contained and proactive manner, methodically evaluating and implementing cost-saving activities that do not harm the business’ overall growth and success.