Aligning IT spending with business requires IT leaders to maximise the business value of every penny invested in IT. This can be achieved by carefully analysing and prioritising IT projects based on their potential impact on the overall business benefits, goals, and objectives. IT management must also ensure that the IT department operates efficiently and effectively, eliminating wasteful spending or redundant systems. Additionally, driving robust collaboration and communication between IT and other business departments is essential to ensuring that IT investments are aligned with the needs and strategies of the organisation.
They know this requires optimising run-the-business IT spend because they need it to free up the budget for grow-the-business investments.
This seems like a worthwhile goal, but many IT leaders struggle to make it a reality. Attempts at optimisation (such as infrastructure consolidation, application rationalisation, cloud adoption, vendor consolidation, or offshoring) often overpromise and underdeliver because they lack complex data and rely too much on instinct. To achieve the goal of optimising IT spending, IT leaders must adopt a data-driven approach.
By leveraging advanced analytics and insights, they can make informed decisions that align with the organisation’s needs and strategies. This will enable them to identify the most effective cost-saving measures and investments, ensuring that resources are allocated efficiently and effectively. With a data-driven approach, IT leaders can overcome the challenges of overpromising and underdelivering, ultimately achieving the desired results for the organisation.
Does this describe you? Ask yourself these questions:
Do you know the cost of delivering and operating each technology, application, and IT service? And does it have sufficient context and granularity to be relevant and actionable by decision-makers throughout IT?
By having this information readily available, IT leaders can make informed decisions about resource allocation, ensuring that resources are being used as efficiently and effectively as possible. Additionally, a data-driven approach allows IT leaders to identify areas where resources may be wasted or underutilised, allowing for adjustments to maximise efficiency. Ultimately, this approach can lead to cost savings and improved overall outcomes for the organisation.
Does your approach capture all sources of costs? For example, can you break down the total cost of supporting each application into the cost of software components and hardware, labour, outside services, facilities, and power that support the application?
If you have actionable business information, do you make it readily available to IT functional leaders, and are they accountable for (or incentivised to) improve cost efficiency?
By understanding and capturing all sources of costs, organisations can make more informed decisions and identify areas where cost savings can be made. Breaking down the total cost of supporting each application into different components, such as software, hardware, labour, and outside services, allows for a more comprehensive analysis of expenses. Additionally, making actionable business information readily available to IT functional leaders and holding them accountable for cost efficiency can drive a culture of continuous improvement and ultimately result in improved outcomes for the organisation.
Do you know the cost of underutilised assets and over-provisioned infrastructure? How do you prioritise fixing these inefficiencies and motivate people to take action?
Are you getting the best pricing from your vendors, or are too many overlapping suppliers fragmenting your buying power?
Regular audits and analyses allow IT functional leaders to gain valuable insights into the cost of underutilised assets and over-provisioned infrastructure. Armed with this knowledge, they can prioritise fixing these inefficiencies by allocating resources accordingly and implementing optimisation strategies. By emphasising the potential cost savings and increased efficiency that can result from addressing these issues, one can encourage people to take action. To ensure the best pricing from vendors, IT functional leaders should implement a vendor management strategy that includes regular evaluation and negotiation. By consolidating suppliers and leveraging the organisation’s buying power, leaders can minimise overlapping suppliers and negotiate better deals. This helps drive cost efficiency and strengthens the organisation’s relationships with vendors.
Do you know the proper usage, adoption, and cost of SaaS? Can you identify underutilised licences and reallocate them before bumping into pricing thresholds?
A vendor management strategy that includes regular evaluation and negotiation is crucial to understanding software’s proper usage, adoption, and cost as a service (SaaS). Organisations can effectively manage vendors by identifying underutilised licences and reallocating them before reaching pricing thresholds. This helps optimise costs and ensures that the organisation is making the most efficient use of its SaaS resources.
Can you trim inefficiencies with confidence and minimal risk? What will be the trade-offs, and will they matter? How will you get buy-in from the business?
How will you continually correct for the drift that naturally occurs over time as business needs to drive the development of new applications, old applications fall out of favour, infrastructure sprawls, new cloud options emerge, business volumes fluctuate, and so on?
To ensure the organisation makes the most efficient use of its SaaS resources, it is crucial to identify and trim inefficiencies with confidence and minimal risk. However, it is essential to consider the trade-offs that may arise from these changes and determine if they will significantly impact them. Gaining buy-in from the business is necessary to implement these efficiency measures successfully. Additionally, it is crucial to establish a system for continually correcting and adapting to the natural drift that occurs over time, such as adjusting to the development of new applications, changes in infrastructure, and fluctuations in business volumes.
If answers to these questions are hard to come by, stubbornly high run-the-business costs are likely crowding out funding for innovation. App teams are probably over-specifying infrastructure because they can’t see how their decisions affect run-the-business costs.
Finance and IT views fail to line up, making it difficult to see where costs and resources are out of alignment. Organisations that rely on intuition and squeaky-wheel approaches struggle to drive optimisation decisions and build compelling business cases for change. If these problems sound familiar, you’re not alone; most IT leaders work with them. Fortunately, many of them have also found a solution to these challenges.