According to Computer Economics survey of 2017-18 IT budget, total IT spending is going to slightly decrease from 2.5% of revenue to 2.3%, that is IT budget will largely remain stagnant in the coming year. This raises the question, do CIOs believe they can bring the digital transformation under this budget? 49% of the respondents reported that the budget allocated to IT is adequate. The percentage of CIOs agreeing to IT budget has increased this year in comparison to last year. This ratio clearly indicates that CIOs are getting used to the budgets that they are asked to work under. This is most likely due to the fact that new technologies, including cloud applications and infrastructure, virtualization etc are allowing CIOs to more quickly and economically roll out new IT capabilities. We investigated further to find out different strategies to reduce IT costs that CIO’s are implementing.
Rackspace recently conducted a study where they found out that 88 percent of cloud users pointed to cost savings and 56 percent of respondents agreed that cloud services have helped them boost profits. Additionally, 60 percent of respondents said cloud computing has reduced the need for their IT team to maintain infrastructure, giving them more time to focus on strategy and innovation. Another prime cost benefit of the cloud’s economy of scale is the ability to scale up and down quickly, across a number of investments. Recently, D-Link moved the vast majority of its non-ERP application portfolio to the cloud, it helped them improve their enterprise agility and risk management and decrease IT costs by $2 million.
The procurement and management of software is one area where expenditure can easily spiral out of control. It becomes crucial that CIOs manage their software assets to deliver the maximum benefits and simultaneously reduce IT costs. You can create an overview of all services and applications installed, and compare it against existing contracts and licenses to identify unnecessary costs. It is often seen that companies have multiple instances of similar business productivity tools, all performing much the same function, consolidation of such applications can very quickly lead to savings, without sacrificing functionality. Many companies also use a cloud dashboard to better control the usage of cloud applications across organizations. One way to optimize cost is while renewing your contract with IT Service Providers, and the most effective means to achieve that is by leveraging a comprehensive future demand roadmap. Multi-year client commitments are extremely valuable to providers, so companies with a solid demand forecast have a strengthened position at the negotiation table.
Automation is fast becoming mainstream because it leads to greater efficiency and higher productivity. According to a survey, 56% of firms are either automating processes or plan to do so over the next 12 months. Respondents claimed that automating processes such as testing, has helped lower long-term cost by 53% and improve the accuracy by 55%. By implementing automated frameworks, organizations can reduce the time and money it takes to manually configure and manage test use cases. Automated tests run on average 5 times faster (probably many more times than that with the use of Artificial intelligence) than manual tests. If a test is automated for a development cycle, re-testing is accomplished with minimal effort during the next cycle, which leads to increase in the size of the test suite, thus expanding coverage.
Allow your employees to telecommute, as with the technology present today, working at home is as good as working from the office. This gives great flexibility to your employees which usually leads to improvements in employee recruitment and retention and also reduces absenteeism. You can also save money on the purchase or leasing of office space. Cisco allows their workforce to telecommute an average of two dates a week, this not just helped employee’s overall job satisfaction but also helped Cisco save approximately $277 million each year in time and productivity costs. Cisco employees also stopped 47,320 metric tons of greenhouse gases from being released.
Virtualization is an incredibly powerful technology to reduce hardware costs, reduce power costs, improve utilization and so forth,” said Pultz. For instance, reducing server count by 75 percent will reduce power consumption by a similar amount. Still, many organizations fail to get the best return on their virtual infrastructures. First, it is important that you put enough VMs on a single server so that it is utilized completely. A lot of companies gets cautious as they do not want to risk pushing servers to the point where performance might not support an SLA during a spike, and so they fail to utilize servers completely. Secondly, focus on using performance-management tools such as Microsoft’s Systems Center Virtual Machine Manager and VMware’s vCenter Server, to manage the environment more strategically and scientifically. Lastly, better lifecycle management of your virtual environment is very important, that means setting policies for provisioning, but also automating provisioning, patching, change management, end-of-life management and all the other processes you’d have to do by hand otherwise.
IT cost reduction is not a single-step process or result of the implementation of a single solution. Instead, it involves a strategic planning around vendor relationships, accounting, infrastructure (cloud and managed services), IT initiatives and end users. By shifting the focus from immediate short-term gains to more coordinated long-term efforts, IT can better position the organization for the future. CIO’s should broadly focus on minimizing spend on existing technologies, optimizing for improved efficiency and implementing different strategies according to future needs. This way CIOs can transform their IT function into a lean, efficient operation while securing additional business benefits.