The COVID-19 pandemic has impacted enterprises in ways no one ever imagined! In addition to shutting down business units, closing doors on certain markets, and losing customers (and employees), most organizations also have had to deal with optimizing IT costs – in order to stay afloat in these turbulent waters. But given the pressure to cut down costs as soon as possible, many are embracing short-term tactics to eliminate wasteful spending. But will such tactics work on the long run?
The Strategies Organizations Are Deploying for IT Cost Optimization
In order to cope up with the COVID-19 pandemic, many organizations are looking to eliminate unnecessary expenditure; right from getting rid of unused systems and tools to eliminating redundant jobs, not investing in updating or upgrading tools, cutting down on advertising expenditure, etc. Although such pure cost reduction programs implemented in response to the crisis might seem to deliver results in the short run, they for sure will not scale in the long run.
To drive long-term efficiencies and value, organizations will to plan for strategic cost transformation measures; they will have to investing in technology to enable strategic IT cost transformation and scale the business in the new normal. They will need to rethink how they do business as well as focus on robust strategies to eliminate wasteful spending and adjust loss of sales due to pandemic-induced challenges.
Why Short-term IT Cost Reduction Measures Are Not Enough
CIOs today are exploring various techniques to navigate budget constraints in today’s volatile business environment. But just implementing a handful of cost reduction measures without evaluating IT spending or cost drivers. Without knowing how costs impact delivery of IT services, overall business costs or revenue, they fail to invest in the right cost optimization measures.
When it comes to optimizing IT costs, strategic IT cost transformation will reap far many benefits as compared to short-term IT cost reduction programs. Here’s why:
Short-term IT Cost Reduction |
Long-term Strategic Cost Transformation |
| Focuses on contract renegotiations | Focuses on identifying existing (and new) value streams |
| Enables technology rationalization | Enables strategic road mapping and prioritization |
| Empowers organizations to consolidate or decommission IT systems and infra | Empowers organizations to carry out detailed technical business review |
| Views IT as a cost center | Views IT as a strategic business asset |
The Best Way to Optimize IT Costs
If you really want to optimize costs successfully and continuously, you need to move away from short-term cost reduction measures and take a long-term cost transformation approach. Here are tips that can help you optimize IT costs and deliver a force multiplier for growth:
- Envision: Develop a well-planned, well thought-of future blueprint of your IT ecosystem to meet larger business goals. Look at cost optimization as a business-driven initiative and get all stakeholders together to forge stronger partnerships and deliver long-term value.
- Transform: Carry out a detailed assessment of your existing systems and align them with value-adding business priorities. Simplify business processes and infrastructure as needed:
- Consolidate infrastructure, rationalize apps, and modernize systems to bring down maintenance and support costs
- Enable automation to deliver quicker, more accurate business results
- Build digital workforce experiences to improve productivity and efficiency
- Invest in shared services to drive economies of scale
- Embrace cloud to enable long-term savings.
- Evolve: Don’t look at transformation as a one-time activity; constantly execute and measure progress and status and leverage structured processes for ongoing business and technology evolution. Plan and prioritize your optimization measures in a way that allows you to harness the full power of your enterprise ecosystem to accelerate growth.
- Grow: Consistently measure IT costs against business objectives and align spend against those objectives. Embrace the services of a Managed Services provider to iterate and innovate wherever necessary to optimize risks and realize long-term, sustainable value.
The Cycle of Transformation
Organizations that are looking to emerge victorious from the pandemic have a lot of work to do, especially with respect to IT cost optimization. Since the crisis has made the business landscape extremely unpredictable, to drive long-term efficiencies and value, short-term cost reduction measures won’t be sufficient. To enable true IT cost transformation, they have to assess their existing IT environment, identify areas for optimization, and re-invest into growth services and capabilities to lower cost structure, deliver better customer experiences, and build more trust.