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

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

As CIOs begin to exhaust the supply-side cost reduction opportunities, controlling consumption and demand offers the next level of cost savings.

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

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

Demand (unrecognised) created by the past business changes
  1. Outdated features and applications: Work with the business users to rationalise outdated product/features that add cost and complexity but little value. Analyse the applications portfolio to identify and eliminate duplicate or obsolete applications thus reducing complexity and the support costs.

  2. Shared Services: Duplicate applications and services increase complexity and reduce agility. Consider a shared services function to eliminate the duplicated IT services and functions across business lines. Virtualisation would allow sharing servers for different applications.

  3. Standardisation: Past decisions may have resulted in greater variety of hardware, operating systems and divisional applications, which significantly increase the complexity, require multiple skill-sets to support and add costs. Aim to standardise and simplify the environment.

Optimise business consumption of IT resources

  1. Adjust service levels: Rewrite service levels based on real business process support requirements. E.g. credit card authorisation within 5 seconds, Order processing completed by 8PM. Discuss trade-offs between costs and service levels. E.g. 7/24 support vs. a lower cost weekday only support.

  2. Business friendly IT service costing: Help the business users understand the cost of IT services and what they can do to optimise the use. Define the service in business terms and use business friendly usage metrics such as ‘number of days’ retention for email, rather than MB. Create ‘service catalogues’ with information about the service; it’s costs and tactics for optimising utilisation. Provide reports to the business on usage and costs.

  3. Realise the savings: As business adjusts IT consumption, IT department needs to adjust related resources and expenses to ensure the resultant savings are realised. Changes to contracts and staffing arrangements may be required to realise the savings.

  4. IT Asset management: Many businesses have unused equipment (PCs, printers, data links, software tools and servers) for which costs are being incurred. Work with business to reclaim/recycle the surplus equipment and reduce costs. “Sweat existing assets” before acquiring new ones.

  5. Account managers as “buyers”: Use IT savvy “account managers” as “buyers” of IT service and place them within business units. Task them to find ways to rationalise demand and remove duplication. These “buyers” must have strong knowledge of the business and IT processes to be effective.

For a detailed discussion and/or information on how you can implement demand management in your organisation please contact the author.

Hemant Kogekar is the principal of Kogekar Consulting. He has previously held CIO/ IT director positions with Suncorp, Citigroup and Franklins. He can be reached at hemant[at]

To read Hemant Kogekar’s last column, click here

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Tags global financial crisishemant kogekarthink tankdemand management

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