DURING a recent business re-org, one of our long-time insurance clients took the opportunity to strengthen their enterprise IT function by centralising it.  One of their first orders of business is to review the IT estate for opportunities to simplify.  

Before I get into Diamond’s answer to this, I thought it would be interesting to see what others would do. So, I asked the Twitter #CIO crowd for their top 3 ideas for IT cost cutting.  In addition to the tongue-in-cheek “Fire the CIO and CTO” answer, there were several good ideas offered.  Thanks to @mcgoverntheory, @dougnewdick, @sethgrimes, @jtbauer, @elliotross, @vpsingh, @smith_marty and @chrisonea for their thoughts.

How To Cut IT Costs – CIO Twitter Community Perspective:

• Eliminate buildings and promote telecommuting
• HW/SW maintenance and 3rd party licenses, telecom, virtualisation and open source
• Not use process as substitute for competence
• Spend less on consulting
• Rigorously scrutinise business cases before and check the actual benefits after IT projects
• I had an IT boss who said he’d fire half his staff if he could. IT advisor replied (privately), Yes, the wrong half.
• Review all maintenance contracts, cut wasted spend
• We are looking at less space & more virtual teaming
• Would get virtual machines, and a tool to manage VM’s

To summarise these proposals, they centre on spending less on physical assets, making better use of staff and more fully leveraging tools to work smarter.

Diamond’s IT Cost Optimisation Framework
Most CIOs I talk with think they can improve process consistency, reduce or eliminate lower priority initiatives and get higher levels of productivity while reducing c osts through simplification.  This is a big goal, but one I have seen some do successfully as long as they do the right things in setting up, building accountability for a staffing the resulting roadmaps.

We think that there are four basic techniques leaders have to lower overall IT cost – we have seen some real improvements as some of our clients have applied them.

1. Environment Simplification - A banking client reduced the complexity of its deposit process by 75% to reduce the number of systems to two.

2. IT Organisation Design & Sourcing - A major school district established a competitive bid process which resulted in negotiated savings of over 15%.

3. IT Spend Analysis & Portfolio Management - A major North American insurer analysed its IT spend and was able to reallocate $300M in “non-discretionary” spend to strategic projects.

4. Delivery Throughput - A financial services company implemented an SDLC framework to move to a more mature level of process discipline using CMMI, and standardise the competency requirements of solution delivery staff and expect a 10-20% improvement in project delivery efficiency.

Simplifying the IT estate is something that many organisations wait to do, resulting in something my partner Paul Blase calls “waxy buildup.”  Whether you wait 3-5 years or or try to keep the house tidy every year is your choice.

CHRIS CURRAN is Diamond Management & Technology Consultants’ chief technology officer and managing partner of the firm’s technology practice. He writes the CIO Dashboard blog at www.ciodashboard.com