Presentation on theme: "How Do Your Clients Perceive IT?"— Presentation transcript:
0 Spend Less on IT, Drive More Value: How Best-in-Class Organizations Do It Spend Less on IT, Drive More Value: How Best-in-Class Organisations Do ItGeorge AmblerGeorge Ambler
1 How Do Your Clients Perceive IT? Our Perception of ITTheir Perception of ITERPCloudDigitalDo We Run IT Like a Business?
2 Key Issues What is the best way to approach IT cost optimization? How to manage IT cost optimization using Gartner’s four phase processHow can a broader approach to IT optimization deliver breakthroughs that increase IT's contribution to business success?
3 Characteristics of IT Cost Optimization Programs Leading Practice: Treat IT Cost Optimization As An On-going IT DisciplineSuccessful IT cost optimization programs have common characteristics that deliver sustained results as compared to typical cost cutting programsCharacteristics of IT Cost Optimization ProgramsHave a clear definition of short- and long-term successOperate from a basis of fact rather than speculationLook at the Demand side of IT as well as Supply sidePrioritize cost savings opportunities taking into account risk to implement in addition to financial paybackAlign IT Cost Optimization management disciplines with business alignment objectivesFocus on successful execution, including a program in place for benefits realization to hold people accountable through measured performanceUse working capital from IT savings to self-fund improvements towards businessEvaluateStrategizeExecuteOptimizeManageStrategizeOur services constantly evolve with clients' changing needs, but our focus on results never changes
4 Gartner Framework for IT Cost Reduction Business Restructuring and InnovationProcess improvement, reorganization, new methodsJoint Business and IT Cost SavingsImplement cost-saving technologies with the businessCost Savings Within ITIdentify opportunities to reduce IT costsIT ProcurementGet the best pricing and terms for your IT purchasesDifficultyValueDifferent types of cost optimization involve different parts of the organization and varying IT department decision rights
5 Key Issues What is the best way to approach IT cost optimization? How to manage IT cost optimization using Gartner’s four phase processHow can a broader approach to IT optimization deliver breakthroughs that increase IT's contribution to business success?
6 Manage IT Cost Optimization Effectively Using Gartner's Four Phase Process Phase 1: Establish BaselinePhase 2: Identify OpportunitiesPhase 3: Develop Capture StrategyPhase 4: Realize BenefitsCapture Total IT CostIdentify Viable AlternativesFeasibility PlanningStand Up ITCO Program OfficeCreate Detailed Road MapCreate the IT Base CaseAnalyze Improvement OptionsSet Measurable TargetsEstablish Cost and Performance Baseline Relative to PeersEvaluate Risk vs. RewardCreate Benefits Dashboards to Measure and MonitorPrepare Org. Change Program
7 Cross Industry Averages 1. Establish a BaselineCross Industry Averages20132014IT Spending % of Operational Expenses 4.4% 4.3%IT Spending % of Revenue 3.5% 3.3%IT Spending per Employee $12,696 $13,100IT Employees % of Total Employees 5.3%* 5.0%*Run 67%Grow 20%Transform 13%IT Capex 29%IT Opex 71%Apps Dev. 18%Apps Support 16%Data Center 23%End User 11%Data Network 9%Service Desk 7%Voice Network 6%IT Mgmt. 6%Fin. and Admin. 4%Hardware 16%Software 20%Personnel 41%Outsourcing 23%Contractors 20%In-house 80%Gartner IT Key Metrics Database, 2014*2012/2013 Figures for IT Employees
8 Start With a Follow-the-money Approach to IT Cost Optimization
9 Cost Optimization Opportunities Remain in Every Area of IT Differences Between Average and Best PerformersOverall IT Spend38% difference in costApplication Development53% difference in cost per function pointApplication Support55% difference in cost per function pointMainframe35% difference in cost per installed MIPSUnix Server62% difference in cost per serverWintel Server32% difference in cost per serverStorage44% difference in cost per TBDesktop22% difference in cost per deviceHelp Desk33% difference in cost per handled contactWide-area Data Network43% difference in cost per deviceLocal-area Network51% difference in cost per active portWide-area Voice Network27% difference in cost per minuteVoice Premise Technologies34% difference in cost per active extension
10 2. Identify Opportunities and Assess Viability For each opportunity generated:What's the upside?Is it worth the effort??Costs, Time, and RisksPotential Benefit:How big is the saving if the action is implemented and how does it affect cash flow?BenefitsSmallMediumLargeBusiness Impact:What impact will this have on the business?NegativeNonePositiveTime Requirement:Can you capture the savings in this fiscal year?>18 months6 to 18 months<6 monthsDegree of Organizational Risk:Will your leaders ensure the changes are made? Is your organization capable of adapting to the changes?High; staff redundancies, and re-engineering of processes and structuresModerate; limited changes in roles, structures, and processesLow; no staff reduction, nor changes in organization and processesDegree of IT Technical Risk:Is there a risk that the change will undermine the ability of your systems to deliver?High; impacts OS, DB, middleware, and applicationsModerate; impacts few components of the architectureLow; little more than "moving boxes"Investment Requirement:Does the change require a large upfront investment before savings can be captured? Is the organization willing to make an investment at all?HighModerateLow/None
11 3. Develop Strategy and Ready Change Program Application Portfolio OptimizationIs the risk worth the reward?$8.0MOutsource Application Development and SupportImplementation Risk/TimeImprove Application DeliveryReform IT Governance and Demand Management$10.5M$5.7M$6.0MOptimize Infrastructure Service Delivery$1.5MImprove ILM and Data$8.0MOptimize End-User Support$1.5M$2.0MRecompete Data and Voice NetworksOpportunities likely taken as natural part of businessBenefits/Cost SavingsILM = Information life cycle management
12 4. Track Benefits Large Program Benefits Predicted Unanticipated Business ChangesComplex Technical SolutionLack of Org. Change Mgmt.Poor Estimation (Benefit Size, Investment)Increase Virtual-izationMature S/W Asset Mgmt. PracticesLarge Program Benefits PredictedMature Key ITIL ProcessesRe-negotiate S/WRationalize ApplicationsDeploy Info. Life Cycle Mgmt.Often Smaller-Than-Predicted Program Benefits Realized
13 Key IssuesWhich IT cost optimization techniques will be most effective going forward?How can IT executives break through cost-cutting barriers and optimize business performance?How can a broader approach to IT optimization deliver breakthroughs that increase IT's contribution to business success?
14 Traditional IT Cost Cutting Provides Limited Value in an Increasingly Digital World IT Cost 4.3% of Enterprise Costs (Opex*)All Other Business Costs*Industry Average 4.3%Government 9.1%Banking 8.0%Healthcare 4.3%Utilities 3.6%Transportation 3.1%Manufacturing 1.8%Retail 1.8%Source of IT Budget Data: "IT Key Metrics Data 2014: Executive Summary" (G )
15 Change the Approach to Deliver ITO360 Traditional ViewCost cuttingLooking at constrained opportunities within ITIT supports the enterpriseCost accountability stays in ITSingle view of the IT budget (General leader view)"Good enough" cost transparencyITO360 ViewValue addingLooking at multiple opportunities outside ITIT is a key partnerCost accountability passes to the businessMultiple views of the IT budgetWorld-class cost and value transparency
16 Work Smarter: Change IT's Role Through ITO360 Approach Increasing IT Engagement and SkillsOptimize Business ModelTechnology InnovatorInformation ArchitectProcess DesignerIT TechnicianOptimize Information DeliveryOptimize Business ProcessesOptimize IT
17 Recognize and Overcome the Barriers That Keep IT in Cost-cutting Mode Typical Barriers:Rank Top 3____Incomplete business strategyBusiness silosLack of integrated KPIsInsufficient business-IT skillsLow enterprise risk toleranceLow IT credibilityCultural issuesPoor innovation processesLack of leadershipInadequate governance
18 Recommendations Be proactive when managing IT cost optimization. Create a cost optimization team.Get the team to leverage the four steps to build a solid IT cost optimization programBreak out of cost-cutting mode by taking transformation actions to position IT and the enterprise IT for success.Build a skilled business and IT workforce focused on enterprise optimization.Forge partnerships with business stakeholders and develop the vision for what ITO360 looks like in your enterprise.
19 Recommended Gartner Research Predicts 2014: Taking a 360-Degree View of IT Optimization Will Deliver Increased Value John Roberts and Barbara Gomolski (G )ITO360: Break Through IT Cost-Cutting Barriers to Optimize Business Performance John Roberts and others (G )How to Manage the IT Budget Wisely Through Cost and Value Optimization Barbara Gomolski and John Roberts (G )For more information, stop by Gartner Research Zone.
20 Spend Less on IT, Drive More Value: How Best-in-Class Organizations Do It Spend Less on IT, Drive More Value: How Best-in-Class Organisations Do ItGeorge AmblerGeorge Ambler