The crisis generated by the COVID-19 pandemic is putting pressure on IT executives (CIOs - Chief Information Officers) to make very difficult decisions, often with the challenge of doing more with less. Against this background, Gartner, Inc., the world leader in business research and advice, recommends that IT directors and leaders take a cost optimization structure to help determine where to reduce IT and business costs.
"Cost optimization ideas are typically defined only on the basis of their possible cost savings, regardless of the effects these cuts can have on business," says Cesar Lozada, Research Analyst at Gartner. “This is equivalent to prioritizing new initiatives based only on potential benefits, without worrying about their possible impacts. Using potential gain as the sole decision criterion can result in a list of initiatives that can generate savings, but can also be risky, have negative impacts on business or, moreover, fail ”.
"To achieve the most sustainable business results, executives must ensure that cost management goes beyond simply cutting or freezing expenses or reducing staff - which is generally a short-term thought," says Chris Ganly, Senior Director Gartner Research Center. “Organizations must approach cost management as a comprehensive effort, which can have an immediate and long-term result in business performance. The management of what is spent requires a combination of approaches and improvements that reach all parts of the organization so that it is really served ”, he adds.
Gartner recommends that IT leaders focus on six areas when assessing the costs, benefits and viability of different cost optimization initiatives.
Potential financial benefit: Establish the degree to which cost optimization will affect the results, dividing the possible options for cuts in small, medium or large, and positive or negative shares. In each action, leaders should ask questions such as "how much will the organization save if the action is implemented" and "how a possible cut would affect the organization's cash flow".
Impact on business: Determine the impact that cost cutting will have on your employees and for daily business operations. Assess whether an initiative can have a negative impact on productivity or product launch.
Time requirement: It will take time for companies to achieve cost savings and generate value from cost optimization initiatives, regardless of the method. The question that IT leaders must ask is what this deadline should be (weeks, months or long term).
Degree of organizational risk: The effectiveness of the cost optimization initiative depends, in part, on the teams' ability to change and adapt to the new reality. Leaders able to articulate the benefits of cost optimization actions with minimal changes in organizational processes will be able to demonstrate the impact of business results, providing a basis for success.
Degree of technical risk: To mitigate technical risk, directors and IT leaders must assess how the cost optimization of a given initiative will be integrated into current operations and the corporate architecture. Delays caused or attributed to the action can result in loss of service delivery or productivity.
Investment requirement: Before starting any cost optimization project or initiative, the executive board must support and agree to finance the necessary changes. CIOs should present a business case that shows how cost optimization will improve business processes, productivity, time to implement new items on the market and the like, rather than continuing with the old status quo. It is essential that the level of investment required is assessed before any savings can be realized.
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