Technological innovation is critical for long term business sustainability – PwC identifies 7 key factors for consideration when implementing IT cost management programme

Sixty-five percent of global CEOs surveyed in the PricewaterhouseCoopers’ 2009 Global CEO survey said that technological innovation is critical for their long term success.

According to PwC’s latest publication launched today ‘Managing IT through the downturn’, carefully managing IT costs is a fundamental cornerstone for maintaining business performance. While opportunities clearly exist in most organisations to reduce IT costs, such measures should only be taken having carefully considered the organisational impact any such changes may introduce.

Ciaran Kelly, Partner, Performance Improvement, PwC said:

“Setting up an IT cost management programme that delivers quick-win cost benefits is vitally important. However, doing it in a way that is sustainable and at the same time engages people and does not increase risk to the business can be challenging. Our report clearly sets out practical short and long term opportunities, typical saving areas and indicative scale of benefits.”

Pat Kelleher, Director, Performance Improvement, PwC added:

“As companies look to achieve significant, rapid cost reductions, the IT function is coming under increasing pressure to reduce its operational costs; reduce discretionary spend and provide the tools and infrastructure to help the business do more with less.”

“Tangible benefits need to be delivered quickly. However, any short term cost savings need to be delivered without compromising future flexibility and in a way that does not lead to the introduction of inefficiencies elsewhere in the organisation.”

Ciaran Kelly concluded:

“Our approach to cost reduction is underpinned by a framework that addresses strategy, structure, people and processes as well as technology. Only by looking at all five dimensions can genuine opportunities be identified to reduce cost and support the delivery of an IT service which supports growth strategies and provides a flexible platform for the future.”

ENDS

The 7 key factors that should be considered when contemplating an IT cost management programme are:

  • Cost cutting needs to be mandated from the top. IT leaders need to demonstrate and be seen to demonstrate strong leadership.
  • The programme and its initiatives need to be designed to really get to the root cause of what is driving IT costs, not just the symptoms. Failing to do this will result in costs growing back over time.
  • Begin with the demand for IT service and be clear on what the customer needs. This means being clear on who and how current service and requirement levels are set.
  • Any cost cutting should be part of a strategic approach to understand the IT cost base and generate competitive advantage for the business.
  • Robust benefit and programme measures need to be put in place to monitor and track progress. Mechanisms need to be in place to enable rapid corrective action to be taken if benefits are not being delivered.
  • Consider how new technologies could be leveraged to deliver cost savings e.g. virtualisation, cloud computing, opensource software.
  • Cost savings from head count reductions or restructuring need to be underpinned by process change. If work processes aren’t changed to reflect new IT organisation structures and models, productivity will suffer in the short term and costs will grow back over time.

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