How can businesses manage technology costs during the Covid-19 crisis?

In recent weeks, businesses (and the world at large) have been hit by a challenge the likes of which has never been seen before — the coronavirus that has disrupted almost every country on earth and forced governments into issuing national lockdowns.

As a result, organisations are being forced to reimagine their workflow and re-evaluate their priorities in light of a completely new set of needs.

Beyond the headline-grabbing event cancellations and manufacturing slowdowns, there are longer term impacts businesses need to account for, especially when it comes to technology costs. IT teams overseeing these technology costs need to lead their own organisations in adjusting to the new state of play.

It’s not going to be easy, as CIOs come under pressure to cut technology costs. But with the right tools and practices, IT leaders can ensure they respond to the ongoing crisis in a strategic way by optimising spending and ensuring long-term success instead of putting in place short-term fixes.

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Establish a holistic understanding

The first step IT leaders need to take in response to this far-reaching crisis is to establish a holistic understanding of the whole technology portfolio and its associated costs.

There are many reasons why IT may not have the full picture. It could be that business units set up their own cloud software without informing the IT team, or that the labour that goes into IT isn’t properly accounted for. However, it’s critical to understand all of these costs before making any decisions on which levers to pull to cut down inefficiencies.

Many CIOs and IT teams are having to make difficult decisions, but having a clear, single view of all technology spend within the organisation makes it much easier to identify strategic wins instead of engaging in ad-hoc cost cutting.

A good framework for doing so is Technology Business Management (TBM) — the practice of running IT like a business within the business. Using TBM, leaders assign value to technology products and services which accounts for their relative costs, and align these with the wider business strategy, making the IT team the centre of the business rather than a separate business unit.

Knee-jerk reactions to kill projects could come back to bite IT leaders down the line — this is not a time for blindly making cuts. Doing so could help businesses to carry on through the coming months but will leave them struggling to catch up to competitors longer term.

Make informed decisions on where to adjust spend and suspend projects

Once you’ve assessed your full technology estate and assigned value to each product and service — as well as accounting for the associated run costs, like labour — you can then make fully informed choices about where to make changes.

Right now, many organisations will immediately need to look at where they can reduce costs, and with a solid baseline in place, CIOs and IT leaders can help the business understand where they can optimise spending by making informed trade-offs, rather than sweeping cuts.

At a time like now, it’s more important than ever for business leaders to have the data to back their decisions. The CIO, as the leader of the technology department, needs to ensure that they are armed with the right information to answer tough questions from other members of the c-suite quickly and in a way that they can understand. It’s their job to direct the business to make the right choices on technology. It might be that now is a good time to scale down your on-demand cloud services while teams pivot to other projects, or it might be a good time to properly evaluate your applications portfolio to see where there is overlap that could be avoided or consolidated.

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Rethink investment and governance processes

Once top-line decisions are made on where to scale back and where to continue to invest, organisations should think about resetting investment and governance processes in light of the new normal.

The coronavirus is going to impact the value that IT employees and contractors are able to deliver against their costs, as well as making it more important than ever to update forecasts and track costs automatically. There’s an evident need to reshuffle planning and governance processes accordingly.

Flexibility is key to responding to crises, which is why IT teams ought to be looking at adopting agile processes if they aren’t already.

Working in shorter cycles means you are better able to evaluate projected outcomes against delivered outcomes quickly, and pivot if needed.

With so many variables changing constantly now, waterfall-style project-based systems could run the risk of seeing much more pronounced discrepancies between forecasts and results, which can hurt the organisation more in times of uncertainty. That’s not to say they’re entirely redundant, but now is the time for IT leaders to ask the question about whether waterfall is still doing the job.

Whatever system you choose, it is paramount now that your investment and governance processes are made flexible and automated where possible to handle this unprecedented level of change. Without this, you’ll find an unsustainable level of time and labour investment going towards remapping costs on a weekly or even daily basis.

Being able to accurately prioritise your investments, optimise any resources and report back on value is core to business resilience when operating in a time of crisis.

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Technology costs need management

Flexibility and resilience are always going to be key in times of disaster. These qualities need to be built into your technology cost management processes, now more than ever before.

It’s going to be a time of significant upheaval and change, with many organisations forced to change their IT processes and practices. However, those who can respond well to the challenge stand to do well in the long term as well as in dealing with this particular crisis.

In many ways, the current situation is a pressure test for the fitness of IT organisations which may see those who respond well becoming leaner, more efficient, and ultimately stronger businesses.

Written by Henrik Nilsson, vice president EMEA at Apptio

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