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Building and Communicating Your IT Cost-Cutting Strategy

Customizable strategies and tools to meet cost-cutting goals.

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Your Challenge

  • COVID-19 is an unprecedented global pandemic. It’s creating significant challenges across every sector.
  • The collapse of financial markets and a steep decline in consumer confidence has most firms nervous about revenue shortfalls and cash burn rates.
  • You need an accelerated approach to budget and cost optimization to respond to this unparalleled event.

Our Advice

Critical Insight

  • Create a short-term focus for events such as COVID-19. Focus should narrow to cost-cutting approaches when unexpected events require immediate decisions and action.
  • The 90% of the budget you keep is much more important than the 10% you cut. Figure out what you need to keep in your cost optimization and then move to what’s redundant or expendable.
  • Crises pass and you need to consider how to recover from short-term cost-cutting measures. When planning cost reductions, you must consider how you will recover and succeed in the long term. All short-term actions need to consider long-term effects.

Impact and Result

  • The approach and deliverables in this research will help you effectively respond to the COVID-19 crisis while also helping you to set budget and costs goals for economic times of recovery and expansion.
  • Info-Tech defines four broad categories of cost classification: workforce optimization, asset optimization, vendor management, and project prioritization.
  • We have a methodology and set of tools that will help you build a cost-cutting and budget action plan based on your specific circumstances and timeline focus.

Research & Tools

1. Optimize budget and cost management

Use our three-step approach to set realistic goals, determine the right cost optimization initiatives, and prepare an effective action plan.

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Each call will focus on explaining the material and helping you to plan your project, interpret and analyze the results of each project step, and setting the direction for your next project step.

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Module 1: Understand Your Mandate Requirements

The Purpose

  • Determine your mandate and requirements for cost optimization.

Key Benefits Achieved

  • A clear understanding of your current state

Activities

Outputs

1.1

Assess internal budgeting constraints: mandatory cuts, caps on budget expansion, line-item constraints, etc.

  • Budget implications of organizational objectives.
1.2

Review relevant organizational objectives and determine impact on IT budget.

  • Relevant IT CapEx and OpEx benchmarks for the period.
1.3

Review IT service catalog and categorize services as KTLO, business support, and transformational.

  • IT service catalog recategorization
1.4

Get an outside perspective: review existing research on spend in the industry across different periods of growth or downturn.

1.5

Adapt (where needed) a best-practice IT budgeting template and adopt a budgeting account structure.

Module 2: Set Your Cost Management Objectives

The Purpose

  • Understand current business cycle and develop an appropriate mode of response.

Key Benefits Achieved

  • Budget impact scenario descriptions
  • Cost management guiding principles for each scenario response

Activities

Outputs

2.1

Identify the position of the organization within the business cycle: growth, slowdown, or downturn.

  • Identified current business cycle
2.2

Articulate the profile of the business cycle and identify three scenarios of impact.

  • Developed three scenarios for your budget and cost management plan
2.3

Determine the IT organization’s mode of response – proactive, reactive, strategic – for each scenario.

  • Determined current mode of response
2.4

Prioritize IT services and identify capacity metrics and targets.

  • Prioritized services and capacity metrics
2.5

Articulate guiding principles for the IT organization’s response across four pillars: workforce productivity, asset efficiency, vendor partnership reinforcement, and project prioritization.

  • Confirmed guiding principles

Module 3: Review Your Universe of Options

The Purpose

  • Gain an assessment of your options around the three scenarios developed in module 2.

Key Benefits Achieved

  • An understanding of all your options of response in order to make the right cost optimization decisions

Activities

Outputs

3.1

For each impact scenario, identify a long list of possible initiatives around workforce productivity, asset efficiency, vendor partnership reinforcement, and project prioritization.

  • Long list of possible cost management initiatives per cost management pillar.
3.2

Identify enabling initiatives.

  • List of enabling initiatives.

Module 4: Identify Your Key Initiatives

The Purpose

  • Decide on the initiatives that will be impacted by your cost optimization.

Key Benefits Achieved

  • List of initiatives to include as part of your cost optimization efforts.

Activities

Outputs

4.1

For the most likely scenario, and considering guiding principles, identify cost effect (quantitative or qualitative) of each initiative.

  • For most-likely scenario: key initiative descriptions and cost effect.
4.2

Brainstorm key initiatives for the year to address each scenario.

4.3

Create initiative profiles.

4.4

Identify initiative timelines and champions.

Module 5: Build a Cost Management Action Plan

The Purpose

  • Finalize a budget and cost management plan.

Key Benefits Achieved

  • A ready-to-present budget and cost management plan

Activities

Outputs

5.1

Develop a one-year budget and cost management action plan for one (most-likely) scenario.

  • One-year budget and cost management action plan
5.2

Update the one-year spending budget corresponding to the budget and cost management action plan.

  • Spending budget.
5.3

Set up review time for workshop deliverables: one-year budget and cost management action plan, and spending budget.

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