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During a recent business re-org, one of our long-time insurance clients took the opportunity to strengthen their enterprise IT function by centralizing it.  One of their first orders of business is to review the IT estate for opportunities to simplify.  Before I get into Diamond’s answer to this, I thought it would be interesting to see what others would do.  So, I asked the Twitter #CIO crowd for their top 3 ideas for IT cost cutting.  In addition to the tongue-in-cheek “Fire the CIO and CTO” answer, there were several good ideas offered.  Thanks to @mcgoverntheory, @dougnewdick, @sethgrimes, @jtbauer, @elliotross, @vpsingh, @smith_marty and @chrisonea for their thoughts.

How To Cut IT Costs - CIO Twitter Community Perspective

1. Eliminate buildings and promote telecommuting
2. HW/SW maintenance and 3rd party licenses, telecom, virtualization and open source
3. Not use process as substitute for competence
4. Spend less on consulting
5. Rigorously scrutinize business cases before and check the actual benefits after IT projects
6. I had an IT boss who said he’d fire half his staff if he could. IT advisor replied (privately), Yes, the wrong half.
7. Review all maintenance contracts, cut wasted spend
8. We are looking at less space & more virtual teaming
9. Would get virtual machines, and a tool to manage VM’s

To summarize these proposals, they center on spending less on physical assets, making better use of staff and more fully leveraging tools to work smarter.

Diamond’s IT Cost Optimization Framework

Most CIOs I talk with think they can improve process consistency, reduce or eliminate lower priority initiatives and get higher levels of  productivity while reducing costs through simplification.  This is a big goal, but one I have seen some do successfully as long as they do the right things in setting up, building accountability for a staffing the resulting roadmaps.

We think that there are four basic techniques leaders have to lower overall IT cost - we have seen some real improvements as some of our clients have applied them.

1. Environment Simplification
   A banking client reduced the complexity of its deposit process by 75% to reduce the number of systems to two.
2. IT Organization Design & Sourcing
   A major school district established a competitive bid process which resulted in negotiated savings of over 15%.
   
3. IT Spend Analysis & Portfolio Management
   A major North American insurer analyzed its IT spend and was able to reallocate $300M in “non-discretionary”  spend to strategic projects.
4. Delivery Throughput
   A financial services company implemented an SDLC framework to move to a more mature level of process discipline using CMMI, and standardize the competency requirements of solution delivery staff and expect a 10-20% improvement in project delivery efficiency.

Simplifying the IT estate is something that many organizations wait to do, resulting in something my partner Paul Blase calls “waxy buildup.”  Whether you wait 3-5 years or more between clean-ups or try to keep the house tidy every year is your choice.  In either case, I hope that this framework helps you get your house in order.
cc licensed flickr photo shared by mullica

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