The 40% IT cost reduction: Here’s how we did it

Allstream’s vice-president of IT looks at the budget challenges facing his peers and offers five guiding principles to optimize spending for the future

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CIOs have been dealing with cost challenges within their respective businesses for many years. From my own personal experience in both the retail and telecom industries, I know that the pressure is unending to provide more and better IT services while at the same time reducing the costs to do so.

Of course, there are no shortages of vendors and consultants who will tell you that their particular product or service is the solution to all of your problems. At the same time, industry proponents will loudly proclaim that the latest industry trend is the “silver bullet” to reducing costs while also improving business capabilities. If it were only that easy!

In my current role at Allstream, we have been able to successfully reduce our IT costs by approximately 40% over the last few years. Our approach has been based on the following principles:

1. Recognizing that the job of looking for increased IT efficiency is never ever completed.  Finding ongoing improvements must be a fundamental part of the culture and must be embraced by the whole IT organization.

2. A good house cleaning can help get rid of the “IT clutter”, which means that there are undoubtedly opportunities to reduce costs by shutting down older technologies and IT tools that may not be delivering the value that warrants the ongoing maintenance and support expense.

3. Working with your key vendor partners to look for cost reduction and increased value creation opportunities to better leverage the investments already made in their products and services. Contract renegotiation plus  vendor spend consolidation should provide the additional leverage opportunities.

4. Putting in place the required governance mechanisms to better manage both the demand side of the work drivers and the supply side of the IT organization. This is not so much about a particular industry framework per se, but good old fashion emphasis on the projects that provide the highest business value and careful stewardship of IT resources to only have that what is truly required.

5. Innovate by taking advantage of major changes in technologies that inevitably are more cost efficient and give you “more bang for the IT dollar”. This could include cloud computing, mobile device management (MDM), big data, social business, virtualization and so on.

In essence, the cost challenges faced by CIOs are no different than those of many other corporate functions. However, CIOs also have significant impact on those other functional areas by the choices that are made.  As a result, CIO cost decisions and their impacts are increasing under the microscope. In this regard, CIOs need to be innovative and take the lead to be ahead of the curve by leading by example.

 

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1 Comment

  1. I think cost reduction without a baseline of some sort is futile – some organization are fat and reducition is easy. I think a more appropriate one is associate with % IT spendgin to sales (old). IT spending to contribution to product, overal company reliance on IT for analysis and operations. These correlations woudl be more meaningful versus just % cuts – it all depends on where you are starting!!!!

    Dean / 9 years ago