“In terms of value you are going to overshoot,” he said. “You are going to be operating at a sub-optimal level, however you will set yourself up when things come back up to quickly establish that optimal spend level because you are operating an efficient operation.”
Really this is all about managing your IT shop in the leanest way possible without cutting business services—something most CIOs try to do day in and day out anyway. What’s different now is the recession (or threat of one anyway). That increases the imperative to make good on the promise that IT can and will run better, leaner while still providing the support the business needs to operate efficiently.
According to the report:
Strategies for driving out inefficiencies include such tried-and-true best practices as reducing architectural and organizational complexity. World-class companies have highly consolidated technology platforms and application landscapes, as well as consolidated data centers.
Demand management and supplier management are also key to reigning in technology cost. The latter can be achieved by negotiating flexible contracts that allow the organization to scale its license fees, infrastructure and networking up and down as swings in demand occur, for substantial technology cost savings.
Finally, demand aggregation, vendor consolidation and vendor management – all practices that originated within the procurement discipline – are highly effective at driving down technology costs. In summary, the keys to technology cost savings are architecture complexity management, centralization, demand management and sourcing.
Then there are all sorts of technology solutions that vendors may begin pushing harder and harder as ways to save IT money. But, be wary, cautions Dorr. Many of these technologies, while good (think virtualization) really do not help you save anything in the long run because they are aimed at providing you with additional capacity at lower or no extra cost.
Since IT is usually a little behind in providing the business with everything it wants, this “excess” capacity then simply gets used up. “I think there are just a lot of technology enabled silver bullets that are a lot of vendor hype and push,” said Dorr.
At the end of the day, it’s good management practices and decisive decision making that saves the most money.