IT is among the highest single areas of expenditure in most businesses, which puts it under considerable scrutiny in the current economic climate. IT is demonstrably a key enabler for both innovation and cost-efficiency, with investment in IT initiatives creating new business opportunities that will typically deliver very significant returns. However, too many IT departments are struggling to make their budgets cover even business-as-usual activities, let alone innovative projects that push the business forward. By improving the efficiency of IT service delivery and aligning it to the business requirements, organisations can reduce business-as-usual costs and free up budget to deliver new capabilities.
The first question to consider is: are you spending too much keeping the lights on in IT? IT spend for most businesses is estimated at between 4 and 7 percent of total revenue. Considering the enormous savings technology delivers in terms of removing paper-based administration and automating business transactions, this might be considered a bargain. But are you sure you’re getting the best possible value from your IT spend? With the constant advances in technology which should outweigh the inflationary pressures, shouldn’t your alarm bells be ringing if your costs are going up every year?
Hence, it’s critically important to eliminate waste in IT expenditure while maintaining or even increasing service levels, thereby freeing up budget to invest in future capabilities. By re-examining the cost and quality of day-to-day operations, you can identify ways to deliver IT services faster, better and at lower cost.
The three broad areas of consideration are as follows:
Infrastructure
Firstly, hardware assets need to be utilized efficiently as over-sized infrastructure is excessively costly to power, cool and manage. Relatively small investments in newer, more reliable hardware backed by automated monitoring and management tools should remove significant manpower costs, cutting the risk and cost of downtime, and freeing up skilled staff to focus on higher-value activities. Alternatively, have you investigated the possible benefits of new infrastructure options, such as cloud computing?
IT Service Management
Secondly, there needs to be clarity around how the IT organisation delivers and manages the services the business needs. Improving the way that you procure hardware and software can save money and provide a more responsive service to the business. It is also useful to consider automating or even outsourcing non-strategic activities to reduce costs and free up skilled in-house resources. Small and midsize businesses can benefit from outsourcing IT to a specialist provider and receive year-round cover at a fraction of the cost of maintaining the equivalent in-house resources.
Applications
Finally, there needs to be a good understanding of the application functionality required by the business, and of how closely the existing solutions meet requirements. Does your company’s application portfolio contain redundant or duplicated functionality or legacy systems that are becoming hard and expensive to support? A formal process needs to be in place to ensure that IT and the business keep reviewing the gap (if any) between functionality and requirements.
Outsourcing Helps to Reduce Costs While Providing the Foundation for Growth
For many organisations, there may not be enough clarity around how the budget splits into day-to-day operations and transformative spend, making it difficult to see how costs are really changing and where improvements can be made. By evaluating and measuring the cost and quality of day-to-day operations, IT departments can realign their activities to deliver the business requirements in a more efficient manner. Efficiency in the critical IT function will not only release funds and skilled staff for more strategic initiatives but also gives you the foundation required for growth.
Companies of all sizes can make significant improvements to IT and business process efficiency, with major benefits to the overall business. And outsourcing can be that leverage you need. For example, a client in professional services industry moved to a managed service for backend infrastructure, reducing costs by 57 percent while improving service levels. Even where systems are kept in-house, large savings are possible.
IT outsourcing has helped many companies to reduce their costs significantly while improving the service quality. It not only frees up your financial and human resources to focus on more strategic initiatives, but also gives you the scalability and flexibility you need. Ultimately, outsourcing is about delivering the strong operational foundation cheaper, faster and better, so you are ready to take on future challenges.