Budgets naturally need to be redrawn and tightened amid the global Covid-19 pandemic – and according to the latest report from Gartner, CIOs need to focus on a multi-faceted plan incorporating business impact and organisational risk to succeed.
The analyst firm has released a six-step cost optimisation framework which CIOs need to explore. Financial benefit is only one of the steps available – albeit an important one – emphasising the need to focus holistically, and reminding that focusing on that area alone could lead to project failure.
Gartner recommends CIOs and IT leaders need to focus on six areas when evaluating the viability of different cost optimisation intiatives:
- Potential financial benefit: While this is an obvious step, leaders need to ask questions such as ‘how much will the organisation save if the action is implemented?’ and ‘how does the action affect organisation cash flow?’ rather than focus on pure numbers
- Business impact: What impact will such a cost-cutting exercise have on employees, for instance? This is not just in terms of staff numbers and – in the worst case scenario – potential redundancies, but will negative productivity result?
- Time requirement: How long after the event will the business realise these cost savings? What time-frame will that be, in weeks, months – or longer term?
- Degree of organisational risk: Leaders capable of articulating the benefits of the cost optimisation, with minimal changes to organisational processes, are best placed to demonstrate its impact on business outcomes by providing a foundation for success
- Degree of technical risk: CIOs must assess how cost optimisation initiatives will be integrated within their current operations and enterprise architecture – failure here may result in a further loss of productivity
- Investment: How can CIOs persuade the rest of the board to undertake this project? Gartner describes this process as ‘essential’, preparing scenarios with greater business processes and time to market compared to continuing with the status quo
“Cost optimisation ideas are typically weighed almost exclusively on their potential cost savings, without considering the effects such proposed cost savings may have on the business,” said Cesar Lozada, senior principal research analyst at Gartner. “This is equivalent to prioritising new initiatives based only on their potential benefits without concern for their impact.
“Using potential benefit as the only decision criterion could result in a prioritised list of initiatives that could yield savings, but could also be risky, have negative impacts on the business or most likely fail,” Lozada added.
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