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Managing IT Costs

The effectiveness of IT investments is a very significant factor in the ability of IT to provide value. Organisations must establish a clear IT service model against which costs can be allocated and performance monitored, including establishing a baseline for both these attributes. Most importantly, this measurement should then be linked to business activity, which enables rational decisions on IT cost management to be taken and understood in the context of business operations and objectives.

It is important that the proportion of IT investment utilised to maintain the current systems is measured, so that it can be conveyed to senior management and fairly charged out to the rest of the organisation. The IT department must grasp the thorny issue of chargeback: whilst the expectation is that in many instances no cash actually exchanges hands, how can the user perceive value when IT services are provided for ‘free’?

IT projects should not be viewed in isolation but looked at holistically as one element for improving the effectiveness of the whole organisation. What has been found to work well is incorporating IT projects as part of organisation-wide initiatives, where the IT element is an enabler rather than the main driver. A good Portfolio Management solution helps an organisation select the right blend and balance of IT investment, as it is critical that those projects are selected that make the best use of both limited financial and human resources, and which provide the maximum value. Doing the right things is just as important as doing things right.

In order to provide the required levels of transparency IT management must put in place the foundations of well-managed IT assets and capabilities, comprising infrastructure, processes, and skills, along with the use of automation, which form very important enablers for successful cost-control processes. Ad hoc manual methods based on spreadsheets are no longer an acceptable or a practicable solution; especially as data quality for accurate and comprehensive IT reporting is now crucial. In order to reach the required level of consistency the use of an architectural approach and the deployment of an integrated toolset and common repository must be an area of focus, as is the setting up of feedback loops and dashboards within an IT governance context.

Learn more about the managing IT costs in Managing Costs in IT 2009: Maximizing the Value of IT Assets and Budgets (BG-0055)

IT Spending 2010

As we have been reporting for the past two years, if IT operational spending is not being as hard hit as economic conditions would warrant, it is because of the fiscal discipline that IT executives have been demonstrating since the last recession. Having gone through the boom-and-bust technology cycle of the late 1990s and early part of this decade, IT managers took a generally conservative approach to IT spending and staffing in the three to four years leading up to the current recession. Growth in IT operational spending in those years was moderate, only reaching 5.0% annual growth in 2007, a far cry from the double-digit growth we reported in the late 1990s. Many companies made painful cuts in IT spending and staffing levels in the early part of this decade, from which they only recovered in 2006 and 2007. Their continued reliance on temporary staff, contractors, and outsourcing in those years shows that IT managers learned the dangers of overspending and overhiring during growth periods.

Learn more about IT Spending in IT Spending and Staffing Benchmarks 2009/2010 (CE-4201)

How to Save with Business Intelligence

1. Focus on the database. Many administrators spend far too much time tweaking BI applications in an effort to make up for shortcomings in the structure of the underlying data-mart or data-warehouse. Focusing on the application layer rather than the infrastructure layer limits an enterprise’s ability to exploit other mechanisms for creating reports and supporting ad hoc inquiries. The data structure should be loosely coupled with the BI application. The majority of development and administration time should be spent on the data model and the logical model, not the application. Robust data structures have the added benefit of greatly reducing BI implementation time and complexity, one of the largest cost components of any BI project.

2. Separate reporting from analysis. Many enterprises use BI tools simply as a way of distributing standard reports rather than as a means of supporting actual analysis. There are easier - and cheaper - ways to distribute standard reports than via a BI application. Determine which users just need access to reports and which users actually have analysis responsibilities. Reassess licensing requirements as dictated by this analysis.

Learn more about Saving Money on Business Intelligence in Kick Start Saving Money on Applications (IN-6902)

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