Opportunities Challenges in IT Cost Reduction Summary Report

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Opportunities & Challenges in IT Cost Reduction: Summary Report www. infotech. com Impact Research

Opportunities & Challenges in IT Cost Reduction: Summary Report www. infotech. com Impact Research 1

Introduction to the Summary Report This summary report contains sample slides from the full

Introduction to the Summary Report This summary report contains sample slides from the full Impact Research Report, “Opportunities & Challenges in IT Cost Reduction. ” The actual report contains 71 slides and provides full analysis and best practices for IT cost reduction, as illustrated in the table of contents below. Table of Contents for “Opportunities & Challenges in IT Cost Reduction” : 1. Executive Summary 2. Research Methodology 3. Influences on Cost Reductions 4. Cost Reduction Techniques 5. Success of Cost Reduction Areas 6. Staffing & Salaries 7. Project Portfolio Management (PPM) 8. Discretionary Spending 9. Vendor & Outsourcer Management 10. Vendor & Outsourcer Management Best Practices 11. Key Conclusions 12. Case Studies www. infotech. com Impact Research 2

Research Method www. infotech. com Impact Research 3

Research Method www. infotech. com Impact Research 3

Research Method Profile of Organizations Studied Respondents by Industry Respondents by Total Employees www.

Research Method Profile of Organizations Studied Respondents by Industry Respondents by Total Employees www. infotech. com Respondents by Region Impact Research Respondents by Job Title 4

Research Method How Survey Results Shape the Format of this Report Respondents answered questions

Research Method How Survey Results Shape the Format of this Report Respondents answered questions about a specific, significant IT cost reduction exercise they were involved with in the past five years, and about what activities contributed to this reduction. Respondents were also asked about the impact of 2008 economic conditions. u Respondents then provided details in 1 of 4 areas: § Staffing and Salaries § Project Portfolio Management (PPM) § Vendor and Outsourcer Management § Discretionary Spending u This report examines why and how IT departments undertake cost reductions, then moves into results and best practices. u The organizations sampled have a particular wealth of experience in Vendor and Outsourcer Management, so an extended set of best practices is offered for this area. u Respondents By Type of Survey Answered Throughout the report, a wealth of interview data validates and illustrates survey results and provides numerous best practices. www. infotech. com Impact Research 5

Why are IT departments reducing costs? www. infotech. com Impact Research 6

Why are IT departments reducing costs? www. infotech. com Impact Research 6

Why are IT departments reducing costs? Overall, IT departments try to optimize cost proactively

Why are IT departments reducing costs? Overall, IT departments try to optimize cost proactively – but the economy is a major factor, too. u An effort to optimize or decrease spending is the largest influence on reducing costs. Organizations are indeed focusing on self-started cost reduction programs that contribute to IT’s overall value. u Despite this, general economic conditions are counted as a moderate or major influence in 6 out of 10 IT departments. u 2008 economic conditions have affected IT to some extent, with almost 4 in 10 organizations decreasing their spend. Change in IT Budget from 2007 to 2008 “…other departments were forced to cut budgets – but we weren’t, because we delivered a flat to modestly increased budget for 4 years without cutting services to the organization. ” CIO, Public Service Organization www. infotech. com Impact Research 7

What cost reduction techniques are used? www. infotech. com Impact Research 8

What cost reduction techniques are used? www. infotech. com Impact Research 8

What cost reduction techniques are used? Cost reduction activities vary across organizations, but a

What cost reduction techniques are used? Cost reduction activities vary across organizations, but a few types of efforts are quite common. Staffing & Salary Changes: u Change in use of consultants/contractors u Layoffs or retirements u Change staff duties or training u Freeze on raises or decrease bonuses u Move full-time to part-time While 3 in 10 organizations have used layoffs to reduce costs, changing the use of contractors & consultants is the most popular. Reprioritizing or cancelling projects are popular choices. Fewer IT departments introduce initiatives that specifically drive cost savings. Vendor & Outsourcer Management: u Renegotiate vendor/supplier/outsourcer contracts u Change outsourcing mix Discretionary Changes: u Change travel levels/policies u Change training levels for staff or management u Reduce team builders/events u Change non-monetary benefits Changing discretionary spending & travel policies contributes to discretionary spending reductions, but few organizations focus here. www. infotech. com Project Portfolio Management (PPM): u Optimize business processes u Reprioritize capital expenditures/projects u Cancel/delay capital expenditures/projects u Introduce new cost reduction projects Renegotiating vendor & outsourcer contracts is very common, with up to half of organizations undertaking this activity. Impact Research 9

How successful are cost reductions in each focus area? www. infotech. com Impact Research

How successful are cost reductions in each focus area? www. infotech. com Impact Research 10

Executive Summary High Gain Organizations that focus on vendor and outsourcer management and staffing

Executive Summary High Gain Organizations that focus on vendor and outsourcer management and staffing and salaries are most successful in saving money – but those savings don’t happen without hard work or growing pains. u Project portfolio management and discretionary spending offer fewer savings opportunities than organizations first realize, and tampering with these areas could cause significant distress in IT. u Staffing & Salaries Vendor & Outsourcer Management Low Gain The success & ease of reducing costs varies considerably by focus area. Discretionary Spending Project Portfolio Management High Pain Low Pain “IT departments are now running leaner and they can tell management, ‘Look, we’re getting closer to the edge. It’s still okay, but if you cut further, you’re going to have major consequences’. ” IT Director, Healthcare Organization IT organizations may not know where the cost savings opportunities are, or recognize the accompanying pitfalls. The best practices in this report help boost savings while preventing pain. www. infotech. com Impact Research 11

What mitigating steps & best practices should IT departments use when reducing costs? www.

What mitigating steps & best practices should IT departments use when reducing costs? www. infotech. com Impact Research 12

What mitigating steps & best practices should IT use when reducing costs? Mitigating Steps

What mitigating steps & best practices should IT use when reducing costs? Mitigating Steps & Best Practices Staffing § Understand why tracking present & future skill-set needs aids staffing decisions. § Learn to increase the training budget to realize productivity gains. Project Portfolio Management § Understand why a clear project management strategy and ongoing prioritization is essential. § Use projects with a savings component to increase IT’s value. Discretionary Spending § To avoid severe negative impact to staff morale, choose the right discretionary budget items to pull back on. § Understand how staff will be impacted by certain policy changes. These mitigating steps & best practices are a sample of what is available in the full Impact Research report, “Opportunities & Challenges in IT Cost Reduction. ” To download the full report, click here. Vendor & Outsourcer Management § Vendor & outsourcer management is time consuming, so learn how to properly organize the continuous cycle of activities required. § Learn which vendors have the most cost savings potential. www. infotech. com Impact Research 13

Case Studies Sample Case Study Proactive Project Portfolio Management Industry Pharmaceuticals Employees 2700 Type

Case Studies Sample Case Study Proactive Project Portfolio Management Industry Pharmaceuticals Employees 2700 Type of Organization Private IT Employees 60 Number of Locations More than 5, international Revenue $1 B Cost Reduction Period 2005 -2007 Revenue Growth -9% IT Complexity High IT Budget $20 M Technology Adoption Average Change in IT Budget -5% The Situation: IT had to cut costs while in the middle of multiple, major projects. At the time, IT was treated as a cost center. Steps Taken: The CIO at this organization believes the value of IT is amplified during a downturn, so the project portfolio was adjusted to provide cost savings. A few of the initiatives that were changed included: u Delaying new projects that could be safely pushed back. For example, delaying the modernization program for infrastructure and data center upgrades. u Reducing the scope of existing projects and cancelling parts of the e-mail archiving project and virtualization program. www. infotech. com u Postponing desktop PC and server upgrades. Pushing refresh cycles for desktops from every 3 -4 years to 5 -6 years and for servers from 4 -5 years to 6 -7 years. The Result: IT met the mandated cuts and established a governance process that didn’t exist before the downturn. Once revenues picked up again, the new processes enabled IT to immediately ramp up to speed on the delayed projects. Impact Research 14