Gartner survey respondents have revealed that their top criteria for selecting cost optimisation priorities is business value or benefits realisation, rather than the biggest or fastest cost reductions.
“The survey findings highlight how cost optimisation has become a business-focused, continuous discipline that drives spending and cost reduction, while maximising business value (see Figure 1),” said Stewart Buchanan, research vice president at Gartner.
“It’s not enough to simply reduce IT spending; CIOs must reinvest in growth and transformation to deliver more value. Those who fail to engage in optimisation risk having savings decisions imposed on them by an advisory organisation with less understanding of IT or digital technology opportunities.”
The survey revealed that larger and more successful organisations plan to give the business greater budgetary control over the savings it achieves. This way, business controls how it spends these savings on digital solutions development.
“Giving money back to business leaders to reinvest in IT demonstrates faith in the maturity of business decision making and in the strength of IT’s business relationships,” added Buchanan.
Leading organisations do the harder things better
The largest and most successful organisations look beyond the quickest or biggest savings ideas to prioritise business value. “They’re not just looking for easy wins, and are not put off by the complexity of an initiative,” said Buchanan.
The survey found that the biggest gap between successful leaders and underperformers is in the three most difficult areas: limiting business demand, negotiating with the business and rationalising application portfolios.
“Limiting overspending must be done carefully, with bravery and diplomacy. The same is true of negotiating with the business about moving to low-cost suppliers,” Buchanan added. “No matter how successfully IT organisations negotiate with their suppliers, they must also negotiate with the business to manage demand and balance corporate economics.”
CIOs are taking control of digital business cost optimisation
The survey looked at how IT organisations’ control over spending on IT and digital technologies has changed in recent years. It found that there are two-and-a-half times as many IT organisations gaining financial control than losing it. This bolsters Gartner’s opinion that the most successful organisations are more likely to trust their IT organisation to manage their IT and digital technology spending.
Respondents were also questioned about who manages the selection and approval of cost optimisation ideas. Those with visibility of both the IT shared services budget and all digital spending across the organisation reported that, on average, nearly half of their digital technology spending is paid for by the business. A quarter is paid for out of the IT budget, with chargeback to the business.
“As you’d expect, CIOs have the most influence over the selection and approval of cost optimisation opportunities within IT shared services,” said Buchanan. “Interestingly, CIOs who focus on digital business opportunities have greater responsibility for cost optimisation than those who don’t. This suggests that CIOs are starting to exert influence over selecting and approving digital business ideas to optimise business costs.”