Three strategies to decrease IT costs and increase business impact

May 5, 2016

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Successful CIOs have to find new strategies to bridge the growing “Digital Divide.”

A veteran CIO recently said, “The last few months felt like I time traveled back to the 1980s. Business stakeholders are demanding the applications they want, designed the way they like, and at a speed dictated by their priorities.” He wasn’t talking about an AS400 based Cobol program; he was talking about custom apps written on industry standard platforms, provided by numerous Platform as a Service (PaaS) providers such as Salesforce, Oracle and ServiceNow.

Our industry has undergone numerous transitions. In the 1980s and part of the 1990s, business users were in control. They could pick their favorite “best of breed” applications, and design and customize them how they wanted. Integration and governance was expensive and difficult. Then, Y2K fueled the growth of Megasuite ERPs. Starting in the late 1990s, IT started controlling the agenda and strong governance led to cost efficiencies, albeit at the expense of user satisfaction.

Fast forward to 2016, Software as a Service (SaaS) and PaaS solutions are empowering users to be in control again. As a result, we are witnessing a growing gap between the total IT spend of an organization, which is increasing as users buy their own SaaS solutions, and the IT budget controlled by the CIO, which is under constant cost pressure. Successful CIOs have to find new strategies to bridge this growing “Digital Divide.”



In the digital age, simply cutting down the IT budget is not a viable option, especially when traditional sources of IT cost savings have already been tapped dry. To be valuable, IT needs to shift from ‘keeping the lights on’ to working on discrete projects that have real business value. Fortunately, there are three new trends in IT that help accomplish that shift:

1. Evolve into a “High Velocity IT” model

The DevOps movement is enabling IT to find new ways to accelerate the velocity of production and innovation to match the speed of business. Leaders can execute quickly and still maintain quality, security, cost-effectiveness, and end-user experience. Key highlights of the model include:

  • Transformation of organization models as IT takes on the role of “broker of services,” focusing on innovation
  • Hiring of IT department MVPs that can act as “versatile generalists” to lead business transformation technology projects and pull in the right partners
  • Adoption of an assemble-to-order approach, along with agile methodologies – even for application deployments

The “High Velocity” model helps reduce the fixed cost of running a large IT department with several super specialists, and increases business satisfaction due to enhanced responsiveness.

2. Adopt flexible applications and hybrid ERPs

As users strive for flexibility, they are turning to new easy-to-use, enterprise-grade applications, as a replacement for the traditional ERP. CIOs need to realize and embrace this model, and establish guidelines on a very limited but core set of applications that are centralized and tightly controlled. Other areas should be opened up for SaaS based solutions that business stakeholders can buy, with guidance and help from IT.

As traditional ERPs transition from on-premise to cloud versions, it presents a great opportunity for CIOs to assess the business functions that really need to be tightly controlled, such as financials, inventory, master data, versus areas that can embrace user led choices such as sourcing/vendor management, CRM, storefronts, etc. This “hybrid ERP” will not only increase user satisfaction and change IT’s image from naysayers to enablers of business, but also help reduce budgets as ERP licenses and infrastructure get streamlined.

3. Build infrastructure with Cloud services

The third proverbial leg in this tripod strategy is to decrease time to market and create operational efficiencies via innovating to choose the right cloud services like Infrastructure-as-a-Service (IaaS), SaaS, PaaS and Business Process-as-a-Service (BPaaS). These Cloud services help enterprises in the following ways:

  • Elimination of infrastructure maintenance costs through a pay-as-you-go model (on-demand)
  • Reduction of capital costs through smaller investments in hardware/software or licensing fees
  • Reduction of training costs since cloud services require a minimal learning curve

Is your organization facing the “Digital Divide,” and how are you coping with it? We would love to hear your thoughts.

 


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This article was originally published by Suheb Siddiqui and Chetan Shetty on CIO Dashboard.

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