Much has been said about best practices in IT management to tide over the economic downturn. Under ever-increasing pressure, many CIOs are now looking at IT Infrastructure management as an effective means to drive business transformation. While most organizations are keen to join in, there are some strategies that may be employed to get quick wins.
The sheer pace of change in the technology space has allowed organizations to outsource key activities that would have otherwise consumed crucial internal resources. Management of IT Infrastructure is one of the areas that can be outsourced to a third party. Studies indicate that up to 80 to 85 percent of management activities can be done remotely thus offering an opportunity to decrease costs*.
* Source: "Remote Infrastructure Management Services: Igniting India's leadership", NASSCOM-McKinsey report 2008
In the past, IT Infrastructure management usually consisted of asset-based transformations. However, with the emergence of solutions such as cloud computing, SaaS and utility computing models, enterprises can now offload their IT assets by subscribing to IT service components without having to actually acquire hardware. This has proven to be useful especially at a time when almost every other day a new technological acronym is born.
CIO Strategies for Improving Productivity and Rationalizing Costs
As hard pressed CIOs continue to focus on boosting productivity while reducing costs, large projects may not be financially viable at this time. However, all is not lost since there are proven strategies available for CIOs to address the challenge of supporting the business with a reduced IT spend.
We recommend a three-phased approach to tackle the issue of cost optimization, innovation, and business-IT alignment to achieve the overarching objective of a lean and efficient IT driving business growth.
Before implementing these strategies, CIOs need to do a robust risk assessment and benefit analysis to determine how these will impact the organization. Rather than being swayed by the hype surrounding some of these strategies, they need to gather information and evaluate the impact carefully.
Many of these strategies assume that the organizations have capabilities to undertake such transformation programs. However, it is necessary that CIOs do a realistic capability analysis and if required, moderate the goals. CIOs will need to prepare a detailed roadmap on how to acquire the required capabilities. A prudent selection of partners and trusted vendors can significantly hasten the process of acquiring the capability.
A critical element is to balance tactical objectives with long-term strategic objectives. While the downturn has forced many CIOs to cut deeply into the organization costs to gain tactical advantage, it is also imperative that they not compromise on the long-term strategies and put the organization at risk during the upturn.
We believe that by following this three step approach where each step builds on the other, CIOs can deliver the promised benefits to the enterprise. CIOs need to consider realistic benefits that can be achieved through the strategies.
Short Term -- Cleanup
Defer discretionary spending - This is relatively easy to achieve, but care must be taken in identifying the projects that are to be shelved. While application upgrade projects are underway, CIOs should scrutinize the benefits of these projects and defer implementation of these upgrades if they are not critical for business. CIOs should review all projects and prioritize them depending on the cost-benefit outcomes. It is also recommended that future direction and growth be accounted for while doing the rationalization exercise.
Decommission little or never used applications - CIOs should consider rationalization of applications as a strategy for reducing costs of IT operations. Elimination of redundant applications is a must in cleaning up the application inventory and reducing support costs. Such a move is an extremely useful lever while dealing with organizations that have grown through M&A or that are organized based on lines of business.
Application portfolio based view of support costs - CIOs need to re-evaluate the cost of managing application portfolios and adjust the service levels based on the utility and criticality of these portfolios in consultation with business partners. One approach for achieving this is to build an inventory of applications, classify the applications maintenance and support needs based on core, sunset and new generation applications and then build appropriate support models with relevant service levels. This allows IT to reduce service levels of up to 30 to 40 percent of application portfolios leading up to 20 percent reduction in costs.
Medium Term -- Reduce Complexity
Consolidate support, platforms and technologies - After elimination of redundant applications, it is prudent to consolidate the application infrastructure and support. Strategies for consolidation could include:
• Shared Services - Setting up a shared services model for application support and maintenance activities: Implementation of a mature shared services model leads to support staff rationalization that can help in releasing the work force and re-deploying them to strategic projects. Retraining the support staff will help increase productivity and application per person ratio.
• Infrastructure consolidation - Consolidation of application infrastructure and leveraging virtualization wherever appropriate helps drive down data center costs.
• Enterprise Architecture consolidation - CIOs need to use this opportunity to assess the application platforms and build long-term and near-term strategies to consolidate and guide the organization toward next generation architecture. This will enable CIOs to be ready for the upturn and position them to support fast changing business demands.
• Consolidation of application support - After the standardization of processes, IT managers should look at consolidation of support and maintenance both within and across application portfolios. We have observed savings of 5 to 10 percent in overhead as well as operational costs due to consolidation.
Why not open source? - Open source products can be considered a feasible alternative to proprietary products. There are positives and negatives to this, based on the criticality of the use for which an open source product is being implemented. The adoption of open source products is recommended after taking into consideration the maturity of the product and its supportability. Lack of available support is a major hindrance to adoption. CIOs need to make a decision on the correct time to implement these products in their environment. Based on the available data, niche implementation of open source in the Web and middleware platforms has delivered more than 25% reduction in licensing costs for customers.
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