Think Tank: Take control of your IT costs during the financial crisis

For effective demand management IT has to put in place processes and people who can understand the business needs and strategies.

As the financial crisis hits and the economy begins to slow, there is increasing pressure on the IT group to contain costs. Being a smart manager, you have already negotiated reduced rates with your suppliers, cut headcount and tightened travel/entertainment expenditure, but the organisation still needs to find more savings. While resources are cut, the demand from business for IT services continues to grow unabated.

As organisations begin to exhaust the supply-side cost reduction opportunities, controlling consumption and demand offers the next level of cost savings. Organisations have achieved additional long-term savings of 10-20% by managing consumption on top of the supply-side savings.

Executive Summary

The challenge of managing costs means that the IT group must look for cost savings beyond the supply side costs controlled within the IT department. Demand Management aims to control consumption of resources by helping the business managers understand how their decisions drive costs, and how IT can help find ways to optimise demand on IT resources.

• As IT has become an integral part of business, demand for IT services and resources, continues to grow. Requests for business process changes, enhancements and procurement of new technologies and e-commerce means the demand for services continues to increase unabated despite business cycles.



• The demand for IT resources appears to be poorly controlled. Most organisations don’t appear to have the right information on the total demand nor credible costs. Appropriate information and incentives for the business to cut the demand do not exist. Two common reasons are:
  -- Inadequate IT cost transparency.
  -- Inadequate responsibility on business heads to control consumption.



• While most organisations have processes to control the demand for the new projects; in areas such as applications support, infrastructure operations and help-desks, such controls are hard to find.



• Even when there are controls on the discretionary project initiation, once underway, there is limited control and almost no incentive to terminate the distressed or wayward projects.

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