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Develop Your IT Cost Optimization Roadmap

A recession is looming. The result? You may be asked to cut costs … and to do it right now.

  • The widely predicted recession is already pushing many organizations across multiple industries to the breaking point.
  • CEOs and CFOs are thinking more about survival than growth, which will force a round of cost cutting across all departments to create short-term, immediate, and measurable impact.
  • Many IT departments will be hard pressed to meet cost-cutting targets at short notice. Combined with uncertainty about the extent of the recession to come, it’s difficult to know if planned cuts are going to be deep enough and whether they could hurt more than they help.

Our Advice

Critical Insight

  • Your IT organization must respond immediately. The secret to success in a recessionary crisis will be to find the reactive, short-term options that have the least negative impact on your long-term business and IT strategic objectives.
  • You will be forced to make hurried decisions. You need an accelerated approach to keep you focused and avoid short-term mistakes that could have long-term consequences.
  • Crises pass and you need to consider how to recover from short-term cost-cutting measures. When planning cost reductions in the near term, you must consider how you will recover and succeed in the long term.

Impact and Result

  • Info-Tech’s methodology helps you build an action-oriented cost optimization roadmap and communication plan based on your specific circumstances and timeline focus.
  • Info-Tech’s four broad IT cost optimization categories – vendor management, asset optimization, project prioritization, and workforce optimization – will help you focus in on specific, business-aligned cost optimization opportunities.
  • The approach and deliverables in this research will help you effectively respond to the recessionary crisis while also helping you to set IT spending goals for recovery and expansion.

Develop Your IT Cost Optimization Roadmap Research & Tools

1. Develop Your IT Cost Optimization Roadmap – A step-by-step cost optimization methodology that helps effectively respond to the recessionary crisis while also setting IT spending goals for recovery and expansion.

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


Member Testimonials

After each Info-Tech experience, we ask our members to quantify the real-time savings, monetary impact, and project improvements our research helped them achieve. See our top member experiences for this blueprint and what our clients have to say.

8.9/10


Overall Impact

$60,535


Average $ Saved

8


Average Days Saved

Client

Experience

Impact

$ Saved

Days Saved

EW Nutrition GmbH

Guided Implementation

8/10

$59,849

5

Eswatini Railway

Guided Implementation

10/10

$50,399

14

Vantage Forward

Guided Implementation

10/10

$85,000

20

Obton A/S

Guided Implementation

8/10

$1,259

1

Maverick Tube Corporation

Guided Implementation

6/10

N/A

N/A

Eastern Michigan University

Guided Implementation

10/10

N/A

5

Parsons Transportation Group Inc

Guided Implementation

10/10

$68,199

2

ACS Ventures Inc.

Guided Implementation

8/10

$27,500

10

Targus International LLC

Guided Implementation

9/10

$247K

10

Pinellas County Clerk of Court

Guided Implementation

10/10

$2,479

5

Crystal Flash Inc

Guided Implementation

9/10

N/A

N/A

CRITICAL Software

Guided Implementation

9/10

$2,216

4


Workshop: Develop Your IT Cost Optimization Roadmap

Workshops offer an easy way to accelerate your project. If you are unable to do the project yourself, and a Guided Implementation isn't enough, we offer low-cost delivery of our project workshops. We take you through every phase of your project and ensure that you have a roadmap in place to complete your project successfully.

Module 1: Understand Your Mandate & Objectives

The Purpose

  • Determine your organization’s current context and its cost optimization objectives, IT’s required response mode, and the set of IT cost optimization goals.

Key Benefits Achieved

  • A business-aligned set of specific IT cost optimization goals.

Activities

Outputs

1.1

Understand your organization’s cost optimization objectives and how this impacts IT.

  • Organizational placement on Info-Tech’s Business Cycle Framework
1.2

Review potential cost optimization target areas based on your ITFM Benchmarking Report.

1.3

Identify factors constraining cost optimization options.

1.4

Set concrete IT cost optimization goals.

  • IT cost optimization goals
1.5

Identify inputs required for decision making.

Module 2: Outline Initiatives for Vendors & Assets

The Purpose

  • Create a longlist of potential cost optimization initiatives focused on vendor management and asset optimization.

Key Benefits Achieved

  • A comprehensive list of potential vendor- and asset-focused initiatives that includes details of their impacts

Activities

Outputs

2.1

Identify a longlist of possible initiatives around vendor contract renegotiation, cancelation, etc., and asset lifecycle management, investment deferral, repurposing, etc.

2.2

Estimate the business impact and risk profile of cost optimization initiatives.

  • Longlist of potential vendor management and asset optimization IT cost optimization initiatives

Module 3: Outline Initiatives for Projects & Workforce

The Purpose

  • Create a longlist of potential cost optimization initiatives focused on project prioritization and workforce optimization.

Key Benefits Achieved

  • A comprehensive list of potential project- and workforce-focused initiatives that includes details of their impacts

Activities

Outputs

3.1

Identify a longlist of possible initiatives around project priorities, project backlog reduction, project intake restructuring, etc., and workforce productivity, skills, redeployment, etc.

3.2

Estimate the business impact and risk profile of cost-optimization initiatives.

  • Longlist of potential project prioritization and workforce optimization IT cost optimization initiatives

Module 4: Develop an IT Cost Optimization Roadmap

The Purpose

  • Develop a visual IT cost optimization roadmap.

Key Benefits Achieved

  • A prioritized, business-aligned IT cost optimization roadmap

Activities

Outputs

4.1

Assess feasibility of each initiative given cost optimization goals.

4.2

Prioritize cost optimization initiatives to create a final shortlist.

4.3

Fine-tune key information about your final cost optimization initiatives and develop a cost optimization roadmap for proposal.

  • IT Cost Optimization Roadmap

Module 5: Communicate & Execute

The Purpose

  • Develop an IT cost optimization roadmap communication plan and executive presentation.

Key Benefits Achieved

  • A boardroom-ready set of communication materials for gaining buy-in and support for your IT cost optimization roadmap

Activities

Outputs

5.1

Outline components of a communication plan, including approvers, stakeholders, and governance and management mechanisms to be used.

  • IT Cost Optimization Communication Plan
5.2

Create an executive presentation.

  • IT Cost Optimization Executive Presentation
5.3

Set up review time for workshop deliverables and post-workshop activities.


Info-Tech’s Essential Guide: Develop Your IT Cost Optimization Roadmap

A recession is looming. The result? You may be asked to cut costs … and to do it right now.

Develop Your IT Cost Optimization Roadmap

EXECUTIVE SUMMARY

What is cost optimization?

It’s not just about cutting costs.

  • While cost optimization does involve cutting costs, it is more about making smart spend and investment decisions.
  • At its core, cost optimization is a strategic decision-making process that sets out to minimize waste and get the most value for money (however value is defined in your organization).
  • Cost optimization encompasses near-term, mid-term, and long-term tactics and objectives, all of which are related and build upon one another. It is an accumulative practice, not a “one and done” exercise.
  • A sound cost optimization practice is inherently flexible, sustainable, and consequence-oriented with the positive goal of generating net benefit for the organization over time.

Change your mindset…

An Info-Tech survey of IT staff reveals that while most agree that cost optimization is an important IT process, fewer of them agree that it’s being managed well in their IT organization.

The image contains a bar graph titled: Cost Optimization. 82.5% agree process is important, and 63.3% agree process is effective.

Info-Tech IT Management & Governance Diagnostic, 2022.

A starting point for cost optimization improvement is adjusting your frame of mind. Know that it’s not just about making painful cuts – in reality, it’s a creative pursuit that’s about thriving in all circumstances, not just surviving.

Many IT organizations are being directed to cut their IT budgets

Recessions generate urgency

  • Cost management and optimization are usually long-term strategic initiatives – organizations and their IT departments seek flexible cost structures and practices focused on maximizing business value while maintaining the ability to adapt to changes in the broader economic environment. However, organizations must also be able to respond to unexpected events.
  • The widely predicted recession is already pushing many organizations across multiple industries to the breaking point.
  • As a result, CEOs and CFOs are thinking more about survival than growth. This will force a round of cost cutting across all departments to create short-term, immediate, and measurable impact.
  • Many IT departments will be hard-pressed to meet cost-cutting targets at short notice. Combined with uncertainty about the extent of the coming recession, it’s difficult to know if planned cuts are going to be deep enough and whether they could hurt more than they help.

How can IT cut enough to have a corporate impact, but not so much that it cannot recover when the recession abates?

The pending recession means that you’re already in a reactive mode when it comes to cost optimization

In reactive mode, mistakes happen

In normal times, Info-Tech recommends avoiding costly mistakes by executing cost optimization with a three-pronged approach:

  • Strategic cost optimization – Focus on establishing an efficient, agile, sustainable, and strategically aligned cost optimization practice across all stages of the business cycle, regardless of business conditions. Time frame is typically 12 months or more.
  • Proactive cost optimization – Focus on enabling the organization to respond to different types and magnitudes of business change in a more planned and controlled manner. Time frame generally falls within three to 12 months.
  • Reactive cost optimization – Focus on quick-to-execute measures with few dependencies and concrete impact in response to business urgency and/or executive directive. Time frame is immediate, usually within three months.

However, global factors like the ongoing COVID-19 pandemic, as well as disruptions and sanctions due to international conflicts, have wreaked havoc with the economy in some unanticipated ways and pushed many directly into reactive mode. Your organization must respond immediately, forcing you to make hurried decisions. Without a strong methodology to keep you focused, short-term mistakes could have long-term consequences.

Info-Tech will help you build a cost optimization plan to help you survive and thrive after the recession

Avoid mistakes using Info-Tech’s cost optimization strategy

Info-Tech has a methodology and set of tools that will help you build a cost optimization action plan based on your specific circumstances and timeline focus. We have defined four focus areas for cost optimization:

  1. Vendor management
  2. Asset optimization
  3. Project prioritization
  4. Workforce optimization

The secret to success in a recessionary crisis will be to find the reactive, short-term options that have the least negative impact on your long-term business and IT strategic objectives.

In reactive mode, your choices actually become clearer, though not necessarily easier. There is nothing like the clarity of a crisis to speed up decision making and cut through bureaucracy.

Use our IT Cost Optimization Roadmap and IT Cost Optimization Executive Presentation template to quickly assemble and present your plan.

Guiding Principles for Operating in Reactive Mode

KEY INSIGHTS

Recessions create complications when it comes to cost optimization best practices

Info-Tech’s Cost Optimization Framework

Info-Tech’s standard approach to initiating IT cost optimization is to look at IT spend through four lenses:

  1. Vendor management
  2. Asset optimization
  3. Project prioritization
  4. Workforce optimization

Ideally, you will examine each of these four areas from a reactive, proactive, and strategic position.

The image contains a screenshot of Info-Tech's Cost Optimization Framework.

In a recession, IT will likely
find itself operating purely in reactive mode.

While IT can come back to proactive and strategic cost optimization opportunities later when conditions improve, it must take decisive action on reactive measures now.

When IT is forced into a reactive mode, it must take quick action with little time for reflection

Info-Tech’s Business Cycle Framework

The image contains a screenshot of Info-Tech's Business Cycle Framework.

REACTIVE: Focus is on quick-to-execute measures with few dependencies and concrete impact in response to business urgency and/or executive directive.

PROACTIVE: Focus is on enabling the organization to respond to different types and magnitudes of business change in a more planned and controlled manner.

STRATEGIC: Focus is on establishing an efficient, agile, sustainable, and strategically aligned cost optimization practice across all stages of the business cycle, regardless of business conditions.

The Bottom Line

Where to focus when cutting your first 10%...

Step 1: Freeze spending

Any deep cost-cutting initiative starts with a spending freeze. Provide a few clear and simple rules. Skip tightening approval levels or increasing bureaucracy, as that will simply allow more loopholes. Stop travel, entertainment, increasing headcount, or new contracts. Provide instructions on how to deal with inflight negotiations.

Step 2: Prioritize vendor contract renegotiation

Sort contracts based on time frame for renewal and necessity. Vendors are experiencing the same cutbacks as you are, and most will be willing to negotiate. Prioritize your key partnerships and largest contracts and work with them first if renewal time frames allow. Postpone any new contracts but communicate a clear date to re-evaluate.

Step 3: Reprioritize the project backlog

Keep and accelerate projects that focus on revenue generation or the customer experience. Consider breaking these projects into series of smaller functional deliverables so that you can bring the highest-value elements to life earlier and defer the less important aspects. Still do your risk assessments, but take a lighter-weight approach in the interest of speed.

The Bottom Line

Where to focus when cutting beyond 10%...

Step 1: Pause, postpone, or cut longer-term projects

Re-align your portfolio according to business strategic priority. Perform a project “purge” immediately. Halt or cut any projects that have been in flight too long and aren’t making progress. Pause those that are consuming too many resources that are needed elsewhere.

Step 2: Ask vendors for the cuts you need

Explain your true situation. Real partners will play ball. To get past a 10% cost reduction, you will need to cut some vendors and slash spending on others. Begin renewal conversations early and set expectations with vendors that you may have to take an “all or nothing” stance.

Step 3: Rationalize apps and licensing

Eliminate redundancies. Look for functionality overlap and excess in your application footprint. While these measures may take longer because they often involve a discovery process and requirements discussions with the business, the cost-savings impact is significant.

Step 4: Redeploy staff

Cuts to assets and projects free up staff. Explore how staff can be redeployed to other priority functions. Redeployment does not need be a perfect skills match – aim for “good enough” as a short-term measure. Keep in mind that if you lay someone off, you may not get that headcount back in the future, so avoid this whenever possible.

Follow these steps to create a recession-responsive cost optimization plan

1. Plan and Define Goals

2. Determine Cost Optimization Initiatives

3. Prepare an Action Plan

Activities

  1. Identify business context and IT response mode.
  2. List cost optimization constraints and parameters.
  3. Set cost optimization goals.
  1. Identify vendor management initiatives.
  2. Identify asset optimization initiatives.
  3. Identify project prioritization initiatives.
  4. Identify workforce optimization initiatives.
  1. Assess initiative feasibility.
  2. Prioritize initiatives.
  3. Develop an action plan.
  4. Build a communication plan.
  5. Create an executive presentation.

Step Outcomes

An articulated understanding of the organization’s situation in relation to the current economic climate and a set of goals for IT cost optimization.

A longlist of potential cost optimization initiatives across four focus areas: vendor management, asset optimization, project prioritization, and workforce optimization.

An executive presentation that communicates your recommended IT cost optimization action plan, plus rationales, for approval.

Given the urgency brought on by economic recession, Info-Tech has condensed its full IT cost optimization approach to help fast-track your decision-making process.

Step 1: Plan and Define Goals

Step 1

Step 2

Step 3

1.1 Identify business context
and IT response mode

1.2 List cost optimization
constraints/parameters

1.3 Set cost optimization goals

2.1 Vendor management

2.2 Asset optimization

2.3 Project prioritization

2.4 Workforce optimization

3.1 Assess initiative feasibility

3.2 Prioritize initiatives

3.3 Develop action plan

3.4 Build communication plan

3.5 Create executive
presentation

This step will walk you through identifying the following information:

  • Business context and IT response mode
  • Cost constraints and parameters
  • Cost optimization goals

This phase involves the following participants:

  • CIO/IT Director
  • IT Finance Lead

1.1 Identify business context and IT response mode to guide cost goal setting

60 minutes

  1. Using the questions on the following slide, conduct a brief SWOT analysis to identify internal strengths and weaknesses and external opportunities and threats for your organization. Document your findings in the template provided.
  2. Next, use the findings from your SWOT analysis and the Info-Tech Business Cycle Framework diagram to consider the following:
    • What business cycle does your organization currently find itself in: slowdown, downturn, recession, or recovery?
    • What cost-related objectives have been stated by organizational leadership, such as cuts, areas of investment, and any targets for both?
    • What is IT’s current mode of response: reactive, proactive, or strategic?

Document the general position of both the business and IT on the Business Cycle Framework diagram.

See the next three slides for the SWOT analysis and Info-Tech’s Business Cycle Framework examples and templates.

Input Output
  • SWOT analysis questions
  • Info-Tech’s Business Cycle Framework
  • An understanding of current business context and relevant IT response mode
Materials Participants
  • SWOT analysis template
  • Info-Tech’s Business Cycle Framework template
  • CIO/IT Director
  • IT Finance Lead

Ask these questions for your SWOT analysis

Strengths (Internal)

Weaknesses (Internal)

  • What is the organization positively known for in the industry?
  • What are the organization’s most popular or successful products/services?
  • What are the organization’s most mature and established processes or characteristics?
  • Does the organization have a clear mission?
  • What are the organization’s staff admired for?
  • Is the organization good at innovating?
  • What is the organization negatively known for in the industry?
  • What are the organization’s least popular or most criticized products/services?
  • What are the organization’s least mature or stable processes or features?
  • How well aligned are departments around the organization’s strategy?
  • Is the organization’s staff base stable and do they receive good opportunities for development and growth?
  • How well does the organization communicate and respond to change?

Opportunities (External)

Threats (External)

  • What are the major industry trends that would allow the organization to do something new or different?
  • Are there any untapped emerging markets domestically or internationally?
  • Are there any new products/services in the funnel?
  • Are there any external partners (including vendors) that can help the organization move forward?
  • Are there business trends that would benefit from IT solutions?
  • Have there been regulatory changes that are likely to change the way the organization operates?
  • Has there been an increase in the frequency or severity of security breaches in your industry?
  • Are customer wants/demands changing or in flux?
  • What are the current state of the economy and forecasts for its future?
  • What have been/will be the effects of a recession on your industry?
  • Is shadow IT prevalent at your organization?

TEMPLATE & EXAMPLE

Document your SWOT analysis findings

Strengths (Internal)

Weaknesses (Internal)

  • Known for our longevity in the industry – over 80 years in business.
  • Production processes very mature and stable – 100% uptime is priority.
  • [Strength]
  • [Strength]
  • [Strength]
  • Not known as innovative or agile – risk averse, which can put us behind the curve sometimes (cautious follower).
  • Turnover historically low but have struggled to recruit new talent/skills.
  • [Weakness]
  • [Weakness]
  • [Weakness]

Opportunities (External)

Threats (External)

  • Enjoyed a stable supply chain during COVID-19 – excellent upstream partners – opportunity to increase visibility/interconnectivity.
  • New markets emerging in Southeast Asia and India – better understanding of these markets could/should prompt some product tweaking.
  • [Opportunity]
  • [Opportunity]
  • [Opportunity]
  • Several competitors hit with ransomware – shadow IT has made us vulnerable.
  • Economy looking very poor – will need to trim and protect the core.
  • [Threat]
  • [Threat]
  • [Threat]

TEMPLATE

Know where you are in the business cycle

The image contains a screenshot of a template to demonstrate the business cycle.

REACTIVE (<3 months)

Focus is on the most effective and least disruptive measures in response to changing economic conditions.

PROACTIVE (3-12 months)

Focus is on enabling the organization to respond appropriately to different types and magnitudes of economic change in a planned manner.

STRATEGIC (>12 months)

Focus is on establishing cost management efficiency and agility across all stages of the business cycle, ensuring that the IT strategy is sustainable regardless of changing economic conditions.

1.2 Define actual budget constraints and parameters

30 minutes

  1. Based on your analysis in step 1.1, assess where spend-change opportunities are currently limited or nonexistent due to organizational edict or policy, industry regulatory requirements, or active contracts. Ask yourself:
    • Where do IT spend caps exist and what are they?
    • What IT spend objectives and practices are absolutely mandatory and nonnegotiable from both a business and an IT perspective?
    • Are there areas where spend change is possible but would be very difficult to execute due to the stakeholders involved, governance processes, time frames, or other constraining factor?
  2. Identify where reduction or elimination of an IT service would negatively affect required service levels and business continuity or recovery.
  3. List constraints as negotiable or nonnegotiable on the template provided.
  4. Remove areas of focus that land outside achievable parameters from your cost optimization scope, and flag those that are difficult but still possible.

See the next two slides for guidance and a template to document your constraints and parameters.

InputOutput
  • Situational awareness and current-state understanding
  • Statement of cost optimization parameters
  • Narrowing of focus for potential cost optimization efforts
MaterialsParticipants
  • Whiteboard or flip charts
  • CIO/IT Director
  • IT Finance Lead

Knowing the difference between negotiable and nonnegotiable constraints creates focus

Identify cost optimization constraints

Organizational Constraints

  • Strategic goals and priorities
  • Financial and market performance
  • Governance style and methods
  • Organizational policies
  • Organizational culture

Legal & Regulatory Constraints

  • Regulatory compliance and reporting
  • Data residency and privacy laws
  • Vendor contract terms and conditions
  • Health and safety
  • Compensation and collective bargaining

IT/Other Constraints

  • IT funding and fund allocation flexibility
  • Staff/skills availability and capacity
  • Business continuity and IT performance requirements
  • Time and time frames

Determine IT’s degree of control

Does IT have the ability and authority to influence or mitigate the constraint?

No – Nonnegotiable

Yes – Negotiable

Establish scope of cost optimization efforts

Note and set aside

Limited or no opportunity to change what can and cannot not be done. The constraint is an imposed priority and must be both accommodated and protected.

Focus here

Opportunity exists to decide whether to act or not act, as well as to adjust the nature, magnitude, and timing of any cost optimization actions taken.

TEMPLATE & EXAMPLE

List high-level areas that limit your cost optimization options

Nonnegotiable constraints

Organizational

Legal & Regulatory

IT/Other

Prioritization of sales/customer service activities

SEC compliance/reporting mandates

Production unit incident response service levels

Constraint] Constraint] Constraint]
Constraint] Constraint] Constraint]
Constraint] Constraint] Constraint]

Negotiable constraints

Organizational

Legal & Regulatory

IT/Other

Core business operations process design

Vendor contracts up for near-term renewal

Current capital project commitments

[Constraint]

[Constraint]

[Constraint]

[Constraint]

[Constraint]

[Constraint]

[Constraint]

[Constraint]

[Constraint]

1.3 Establish cost optimization goals

60 to 90 minutes

  1. Establish specific cost optimization goals for IT. Identify both amounts and time frames, as well as likely/suitable approaches you plan to employ to achieve these goals. Use the questions below to help structure your analysis.
    • Are priorities shifting due to changes in the organization’s economic and operating context as established in step 1.1?
    • What are the real impacts of the current or shifting economic and operating contexts on IT?
    • What does IT need to achieve in terms of its costs? Reduction? Reallocation? Investment? A mix of all three?
    • Is it wiser to set multiple targets right now or just one?
    • What is IT’s role and degree of agency when it comes to financial influence and decision making in the organization?
  2. Document your final cost optimization goals in the table template provided.

Download the Cost Optimization Workbook

InputOutput
  • Situational awareness and current-state understanding
  • Defined goals for IT cost optimization
MaterialsParticipants
  • Whiteboard or flip charts
  • Tab 1 in the Cost Optimization Workbook
  • CIO/IT Director
  • IT Finance Lead

1.3 Continued

Sample scenarios:

Scenario

Business Lifecycle Position

IT Response
Mode

Goals

There has been a softening in the economy and the business is anticipating missing annual revenue targets. The business has announced budget cuts for the following fiscal year.

Slowdown

Proactive

  • Plan next year’s budget with an expected 15% reduction in mind.

An opportunity to access a new market through the creation of a new product line presents an opportunity to transform the business.

Expansion

Strategic

  • Ensure cost effectiveness of IT service delivery to support new product.
  • Establish IT capabilities and skills to support new product.
  • Prioritize and fund innovation project to support new product delivery.
  • Negotiate cloud agreement with vendor to support new product.

Significant downturn in the economy has resulted in significant revenue losses this quarter. Business has directed all departments, including IT, to reduce costs by 20% in the next three months.

Downturn

Reactive

  • Cut IT department spend by 20% within three months.

TEMPLATE & EXAMPLE

Document your mandates, specific goals, and high-level approach

Current IT budget = [$]

Business Cycle Mandate

Goals

Approach

1
  • Cut current IT budget 5% by end of FY2022.
  • 5% of IT budget = $699,346
  • Target IT budget by end of FY2022 = $13,287,573
  • Reactive mode – focus on most effective and least disruptive measures.
  • Renegotiate, cancel, or postpone in-flight and planned projects and vendor contracts up for renewal in the next three months.
2
  • [Mandate]
  • [Goal]
  • [Goal]
  • [IT response mode]
  • [Main tactics to be pursued]
3
  • [Mandate]
  • [Goal]
  • [Goal]
  • [IT response mode]
  • [Main tactics to be pursued]

Step 2: Determine Cost Optimization Initiatives

Step 1

Step 2

Step 3

1.1 Identify business context
and IT response mode

1.2 List cost optimization
constraints/parameters

1.3 Set cost optimization goals

2.1 Vendor management

2.2 Asset optimization

2.3 Project prioritization

2.4 Workforce optimization

3.1 Assess initiative feasibility

3.2 Prioritize initiatives

3.3 Develop action plan

3.4 Build communication plan

3.5 Create executive
presentation

This step will walk you through the following deliverables:

  • Cost Optimization Workbook

This phase involves the following participants:

  • CIO/IT Director
  • IT Finance Lead
  • IT System Architect
  • PMO Lead
  • Other IT Management

There are four main cost optimization areas

WORKFORCE OPTIMIZATION

  • Resource capacity management
  • Managed services

ASSET OPTIMIZATION

  • Application rationalization
  • Cloud strategy

VENDOR MANAGEMENT

  • Contract negotiation
  • Vendor consolidation
  • License optimization

PROJECT PRIORITIZATION

  • Project portfolio management

Different cost optimization tactics are used for different target areas and IT response modes

VENDOR MANAGEMENT

ASSET
OPTIMIZATION

PROJECT PRIORITIZATION

WORKFORCE OPTIMIZATION

Reactive

  • Renegotiate current contracts
  • Cancel current contracts
  • Renegotiate/suspend/cancel pending contracts
  • Reduce software license costs
  • Consolidate assets
  • Delay upgrades and refreshes for applications and hardware
  • Existing projects: resize/rescope
  • Existing projects: postpone/cancel
  • New projects: delay/cancel
  • Determine optimal staffing levels
  • Identify core/critical training program elements
  • Determine expendable staff-related ancillary costs

Proactive

  • Assess existing vendor contracts for performance
  • Renegotiate existing terms
  • Evaluate switch to lower-cost vendors
  • Optimize capacity utilization
  • Extend asset maintenance schedules vs. purchase new equipment
  • Move services to cloud (software as a service)
  • Develop criteria for project intake
  • Prioritize projects in portfolio based on business value
  • Develop criteria for project approvals
  • Determine current staff skill and capability levels
  • Prioritize associated workloads by business value
  • Determine workforce deployment against prioritized workloads

Strategic

  • Establish a vendor management office (VMO)
  • Align vendor management strategy with sourcing strategy
  • Implement smart contracts
  • Develop a sourcing strategy
  • Build application rationalization framework
  • Establish a comprehensive IT asset management (ITAM) practice
  • Establish project and portfolio management (PPM) practice
  • Establish project management office (PMO)
  • Establish demand and resource management capabilities
  • Develop a workforce strategy to optimize staffing capabilities aligned with business value
  • Adopt a Lean approach to managing workloads and workforce capacity
  • Identify automation opportunities to augment workforce capacity

Determine focus area initiatives based on IT response mode

Based on the outputs of step 1, use the Cost Optimization Workbook to identify appropriate cost optimization activities.

REACTIVE Examples

PROACTIVE Examples

STRATEGIC Examples

Significant downturn in the economy has resulted in significant revenue losses this quarter. Business has directed all departments, including IT, to reduce costs by 20% in the next three months.

  • Optimize existing applications.
  • Scale back on vendor engagements.
  • Reduce project overhead by cutting projects.
  • Reduce headcount.

There has been a softening in the economy and the business is anticipating missing annual revenue targets. The business has announced budget cuts for the following fiscal year.

  • Identify redundant assets based on usage reports; plan for reduction in assets by sell-off.
  • Identify vendor contracts that can be renegotiated or are coming up for renewal and plan for cost-cutting negotiations with those vendors.
  • Identify the highest-priority projects and reprioritize those that can be delayed or postponed without impacting the business.
  • Identify skill and knowledge gaps that contribute to higher operating costs and plan to rectify through cross-training exercises.

An opportunity to access a new market through the creation of a new product line presents an opportunity to transform the business.

  • Develop a sourcing strategy that encompasses shadow IT to optimize assets and vendor management opportunities.
  • Establish project portfolio management capabilities.
  • Establish an AI strategy to leverage robotic process automation (RPA) capabilities, enabling either headcount reduction or redeployment of human assets to more value-added workloads.

2.1 Identify vendor management initiatives

2 hours

  1. Identify all existing vendor contracts and create an inventory.
  2. Prioritize the five contracts constituting the highest IT spend. For each contract:
    • Identify the business purpose/drivers.
    • Identify the expiration/renewal date to determine time frames for action.
    • Determine if there is an opportunity to right-size, cancel, renegotiate costs/service levels, or postpone renewal/purchase.
    • Identify integrations and interdependencies with other hardware and software systems to understand scope and impact of potential changes.
  3. Repeat the previous activity for lower-value contracts (if time).
  4. Review your in-house vendor management processes to see where efficiency and effectiveness could be improved overall.
  5. Document cost optimization opportunities related to vendor management. Note where opportunities here impact or overlap with asset optimization, project prioritization, or workforce optimization initiatives.

Download the Cost Optimization Workbook

Input Output
  • Vendor contracts
  • Completion of tab 4 in the Cost Optimization Workbook
Materials Participants
  • Tab 4 in the Cost Optimization Workbook
  • CIO/IT Director
  • IT Finance Lead
  • IT Systems Architect
  • Other IT Management

Vendor Management

Tips for managing vendors and vendor contracts in reactive mode

Insight 1

Take a minute to think

Don't rush into slash-and-burn mode. While time is of the essence, there are always long-term issues and relationships to consider. How you treat your vendors now will shape your relationship with them in the long run.

Insight 2

Negotiate collaboratively with your vendors

If you are too demanding or take unnecessary advantage, there’s a good chance the vendor will treat you the same when conditions change to their favor. Vendors are experiencing the same cash-flow challenges as you. Key partners providing long-term essential services may be more willing to negotiate than short-term contractors who are also in a crunch.

Insight 3

Be open-minded

Negotiations (when required) will be atypical for both parties. New solutions should be considered and worked through with partners. Be patient and don't be afraid to put forward unusual ideas.

2.2 Identify asset optimization initiatives

2 hours

  1. List all hardware, software, and facility asset costs for delivery of IT services.
  2. Analyze use of hardware and software assets for opportunities to consolidate, reduce, or eliminate assets or to enhance functionality or automation. Look for:
    • Redundancy or duplication of functionality not necessary for disaster recovery or business continuity purposes.
    • Little-used or unused software.
    • Homegrown or legacy systems with high maintenance/support burdens.
    • Multiple, old, or unsupported versions of currently used software.
    • Instances of unsanctioned shadow IT.
    • Under-automated business processes.
    • Opportunities to delay hardware/software refreshes or upgrades.
    • Cloud/outsourced options. Opportunities to train end users on using assets’ functions more effectively.
  3. Document cost optimization opportunities related to asset optimization. Note where opportunities here impact or overlap with vendor management, project prioritization, or workforce optimization initiatives.

Download the Cost Optimization Workbook

InputOutput
  • List of current assets, including hardware, software, and facilities.
  • Completion of tab 3 in the Cost Optimization Workbook
MaterialsParticipants
  • Tab 3 in the Cost Optimization Workbook
  • CIO/IT Director
  • IT Finance Lead
  • IT Systems Architect
  • Other IT Management

Asset Optimization

Tips for managing IT assets in reactive mode

Insight 1

Declare a spending freeze

Communicate clearly to staff that your organization is implementing a short-term spending freeze. Most staff will understand that curbing discretionary spending is key in a crisis. A few clear, specific rules are better than complicated processes.

Insight 2

Resist adding more spending rules

Adding more bureaucracy to curb spending is not effective. Requiring higher levels of approval for spending may curb spend in the long run, but it consumes people resources and introduces delay. Simply put, making your organization less efficient to reduce spending is not a good idea. Instead, use existing control structures and provide clear, concise instructions.

Insight 3

Take a hard look at waste

Enact a war on waste. Almost all organizations have wasteful spending habits that, because of other priorities, have avoided detection or haven’t been audited. Now is the time to look at all asset usage and prioritize reduction of wasteful spend.

Insight 4

Keep all doors open

Crises create opportunities. Consider not only how you will recover but also how you can take advantage now to expedite value-added initiatives. For example, cutting spend on infrastructure hardware now may be what you need to accelerate an outsourcing strategy.

2.3 Identify project prioritization initiatives

2 hours

  1. Identify both in-flight and planned projects from the project portfolio, if it exists, and record as input in tab 2 of the Cost Optimization Workbook.
  2. For each project in the list, identify a cost optimization initiative, including:
    • Revisiting, confirming, and documenting actual project rationale with the business in relation to strategic goals.
    • Rescoping existing projects that are underway.
    • Accelerating planned or existing projects that enable business cost savings or competitive advantage and revenue growth.
    • Canceling or postponing projects that are underway or haven’t started.
    • Identifying net new projects that enhance business capabilities or save business costs.
  3. Review your in-house project management and project portfolio management processes to see where efficiency and effectiveness could be improved overall.
  4. Document cost optimization opportunities related to project prioritization. Note where opportunities here impact or overlap with vendor management, asset optimization, or workforce optimization initiatives.

Download the Cost Optimization Workbook

Input Output
  • List of current and pending projects
  • Completion of tab 2 in the Cost Optimization Workbook
Materials Participants
  • Tab 2 in the Cost Optimization Workbook
  • CIO/IT Director
  • IT Finance Lead
  • PMO Lead
  • Other IT Management

Project Prioritization

Tips for managing IT projects in reactive mode

Insight 1

Put everything on the table

This is about survival. This means that projects and other measures will be considered now that would never have been considered in more stable times. Be bold and know that the path to big impact might not be a direct one.

Insight 2

Beware of sacrificing value

Remember that IT is a value creator, not just a cost center. It’s tempting to focus only on net costs and not business value when under pressure. However, projects that generate revenue or affect customer experience may be more important than short-term cost-cutting.

Insight 3

Make decisions with limited information

Perfect is the enemy of good when time is of the essence. Higher-risk decisions may be required. Accept that you can’t wait and see, you will make mistakes, and you will have to adjust as you go. As much as possible, match every short-term decision with an associated long-term risk assessment. Mitigate risk by breaking projects into smaller pieces and scoping them down so that any negative consequences can be more quickly rectified.

2.4 Identify workforce optimization initiatives

3 hours

  1. Review the IT department organizational chart and salaries by role. Do not review IT staffing in terms of named individuals who occupy a given role – focus on the roles only.
  2. Look for opportunities to:
    • Rectify efficiency, effectiveness, and other performance issues.
    • Train IT staff to enhance or improve skills and effectiveness.
    • Add roles, skills, or headcount to improve effectiveness.
    • Integrate teams to improve collaboration and reduce redundancies, or break out new teams to increase focus/specialization.
    • Redesign job roles and responsibilities.
    • Redeploy/reassign staff to other teams.
    • Conduct layoffs (as a last resort).
  3. Document cost optimization opportunities related to workforce optimization. Note where opportunities here impact or overlap with vendor management, asset optimization, or project prioritization initiatives.

Download the Cost Optimization Workbook

Input Output
  • Organizational charts
  • Staff lists
  • Completed tab 5 in the Cost Optimization Workbook
Materials Participants
  • Tab 5 in the Cost Optimization Workbook
  • CIO/IT Director
  • IT Finance Lead
  • Other IT Management

Workforce Optimization

Tips for managing IT employees in reactive mode

Insight 1

Deal with low performance now

There is no room for lingering performance problems in a crisis. Get more rigorous in your performance management practices. Know where your performance issues exist in advance so if the worst happens and layoffs are necessary, you have clarity on where to go first.

Insight 2

Continue to hire great people

A spending freeze does not have to mean a hiring freeze. Don’t miss an opportunity to add great people to your organization. Keep looking to staff your organization for future needs and be prepared to advocate for the right targeted hires even through a spending freeze.

Insight 3

Cutting staff may be necessary

Staff reductions are the hardest part of cost cutting. Leave this measure until last. If reductions are necessary, then significant time must be spent on planning, communicating, treating affected staff with respect, and ensuring that remaining staff stay engaged. Before enacting staff reductions, always carefully consider redeployment of existing resources first – losing headcount and skills does not position you well for future recovery and growth.

Insight 4

Keep in touch

This applies both to remaining staff and those that have been laid off. Update them regularly on developments and outlook. Ask if there are ways the organization can help them in the current circumstances. Most of all, be honest yet compassionate – maintaining trust and goodwill is key so that everyone can benefit when conditions improve.

Step 3: Prepare an Action Plan

Step 1

Step 2

Step 3

1.1 Identify business context
and IT response mode

1.2 List cost optimization
constraints/parameters

1.3 Set cost optimization goals

2.1 Vendor management

2.2 Asset optimization

2.3 Project prioritization

2.4 Workforce optimization

3.1 Assess initiative feasibility

3.2 Prioritize initiatives

3.3 Develop action plan

3.4 Build communication plan

3.5 Create executive
presentation

This step will walk you through the following deliverables:

  • Cost Optimization Roadmap
  • Cost Optimization Communication Plan
  • Cost Optimization Executive Presentation

This phase involves the following participants:

  • CIO/IT Director
  • IT Finance Lead
  • Other IT Management

Develop your prioritized and aligned cost optimization roadmap

The process of developing your roadmap is where you conduct a final rationalization to decide what’s in and what’s out, set final cost optimization priorities, and document your proposed plan of action.

First, take a moment to consider if you missed anything. Too often, only the cost-cutting elements of the cost optimization equation get attention. Remember that cost optimization also includes making smart investments. Sometimes adding and expanding is better for the business than removing or contracting.

  • Do your proposed initiatives help position the organization to recover quickly if you’re dealing with a downturn or recession scenario?
  • Have you fully considered growth or innovation opportunities that will help optimize costs in the long run?

Feasibility

Eliminate initiatives that cannot be achieved from the longlist of potential initiatives, given the cost optimization goals you determined at the beginning of this exercise.

Priority

Rank the remaining initiatives according to their ability to contribute to goal attainment and their dependencies on external constraints and one another.

Action Plan

Create an overarching visual roadmap that shows how you intend to achieve your cost optimization goals over the short, medium, and long term.

3.1 Test your cost optimization initiatives for feasibility

3 hours

  1. Confirm your cost optimization mandate and goals established in steps 1.1 to 1.3.
  2. Using tab “7. Action Plan Priorities” in the Cost Optimization Workbook, review the IT and business impact of each initiative in terms of its time frame, ease of execution, and risks.
    • Identify initiatives with timelines for initiation, execution, and completion that exceed the time frames dictated by your goals. Eliminate these from your roadmap.
    • Next, review all initiatives that are high risk and hard to execute and consider eliminating these from your roadmap. Do the same with high risk/easy to execute, low risk/hard to execute, and low risk/easy to execute initiatives in that order.
  3. Set aside any initiatives on your shortlist that don’t meet feasibility criteria.

Download the Cost Optimization Workbook

InputOutput
  • Tab 7, Action Plan Priorities, in the Cost Optimization Workbook
  • Shortlist of cost optimization initiatives
MaterialsParticipants
  • Tab 7 in the Cost Optimization Workbook
  • CIO/IT Director
  • IT Finance Lead
  • Other IT Management

TEMPLATE & EXAMPLE

The feasibility analysis identified several initiatives to be removed from the longlist

Initiative

Rationale

Accelerate IT service catalog update initiative

Execution time frame exceeds goals’ time frames

Implement IT cost showback to business units

Execution time frame exceeds goals’ time frames

Consolidate Marketing tools onto a single platform

Execution time frame exceeds goals’ time frames

Cancel hosted time tracking application contract. Revert to previous on-premises app.

Too disruptive to users across several departments.

Defer backfill of one applications maintenance/support vacancy

Premature – significant negative effect on service levels

[Rationalize]

[Rationalize]

[Rationalize]

[Rationalize]

[Rationalize]

[Rationalize]

[Rationalize]

[Rationalize]

[Rationalize]

[Rationalize]

[Rationalize]

[Rationalize]

[Rationalize]

[Rationalize]

[Rationalize]

[Rationalize]

[Rationalize]

[Rationalize]

3.2 Prioritize your cost optimization initiatives

3 hours

  1. Using your cost optimization initiatives shortlist, IT response mode, and understanding of initiative interdependencies, test different execution ordering scenarios for your shortlist of initiatives. Use the following questions and guidance on the following slide to aid this effort:
    • Does the initiative directly support business goals or recovery?
    • Does the initiative rely on another one being executed or some other action/event? Are these dependencies within IT’s control or does control reside elsewhere?
    • Are there contractual or compliance dates that affect when you can act?
    • Are resources to execute available now or must they be freed/acquired?
    • How long will the initiative take to execute end to end? Must it be started earlier than others so it can be completed in time?
    • Does the initiative require any new spend or action that requires an approval process?
  2. Set your final prioritized list of cost optimization initiatives.

Download the Cost Optimization Workbook

InputOutput
  • Tab 7, Action Plan Priorities, in the Cost Optimization Workbook
  • Final prioritized list of cost optimization initiatives
MaterialsParticipants
  • Tab 7 in the Cost Optimization Workbook
  • CIO/IT Director
  • IT Finance Lead
  • Other IT Management

A range of factors are considered when ranking prioritization criteria

Business impact

Spend change magnitude

Is spend being reduced or increased, and by how much?

Degree of risk

Does it affect IT’s ability to support business continuity or recovery?

Operations

Time frame to execute

What’s the degree of urgency to get things done?

Critical-path dependencies

Are there any other things that must be done before we can start?

Availability of resources

Do we have the right people and skills (in the right amount) to do it?

Effort

Ease of execution

How complex, effort intensive, and resource consuming is this to do?

IT’s response mode, as determined by business context and goals, can have a major influence on prioritization criteria ranking. Below are some criteria ranking guidelines for different cost optimization scenarios.

Reactive

“Aggressive”

Proactive

“Assertive”

Strategic

“Thoughtful”

  1. Time frame to execute
  2. Ease of execution
  3. Availability of resources
  4. Spend change magnitude
  5. Critical-path dependencies
  6. Degree of risk
  1. Time frame to execute
  2. Degree of risk
  3. Spend change magnitude
  4. Critical-path dependencies
  5. Availability of resources
  6. Ease of execution
  1. Degree of risk
  2. Spend change magnitude
  3. Critical-path dependencies
  4. Time frame to execute
  5. Availability of resources
  6. Ease of execution

Given that you’re in reactive mode due to the recession, you need to take a more aggressive posture with prioritization. Ability to execute quickly is your leading decision-making factor, which means time frames and ease of execution will dominate. While risk must always be considered, you won’t have the information you’d normally have and will need to take a more rapid and lightweight approach to this step.

TEMPLATE & EXAMPLE

List your prioritized cost optimization initiatives

Initiative Priority Time Frame Potential Savings Focus Area Approver
Freeze all overnight and nonessential IT staff travel 1 Immediate $15,000 Workforce Optimization CIO
Suspend IT team discretionary spend 2 Immediate $6,000 Workforce Optimization CIO
Postpone nonessential IT staff training 3 Immediate $55,000 Workforce Optimization CIO
Cancel VR simulation project 4 Immediate $370,000 Project Prioritization CEO
Postpone robotic process automation for Gizmo production 5 Immediate $110,000 Project Prioritization VP Production
Pause Salesforce view redesign project 6 Q4 FY2022 $160,000 Project Prioritization VP Sales
Rescope corporate website redesign project 7 Q4 FY2022 $90,000 Project Prioritization Director of Marketing
Rescope SharePoint optimization project 8 Q4 FY2022 $85,000 Project Prioritization IT Steering Committee
Eliminate extra Adobe versions/licenses 9 Q4 FY2022 $22,500 Asset Optimization IT Steering Committee
Cancel Webex licenses 10 Q4 FY2022 $50,000 Vendor Management IT Steering Committee
Before end of FY2022 $963,500

TEMPLATE & EXAMPLE

Summarize the overall cost impact of your final list of prioritized initiatives

Summary of Initial Targets

Current IT budget

$13,986,919

Cost-reduction target for end of FY2022

$699,364

Cost-reduction target for Q1/Q2 FY2023

$1,328,757

Total cost-reduction target by end of Q2 FY2023

$2,028,103

Summary of Estimated Actuals

Estimated actual cost reduction for end of FY2022

$962,500

Estimated actual cost reduction for Q1/Q2 FY2023

$1,123,000

Estimated actual cost reduction by end of Q2 FY2023

$2,085,500

Estimated actual IT budget by end of Q2 FY2023

$11,901,419

  • Approximately $1,000,000 in additional IT cost-saving initiatives has already been identified; however, these initiatives are longer-term in nature and cannot be completed during the time frame established by current goals.
  • Any longer-term initiatives to be started during the second half of FY2023 or later will be presented in a separate proposal for approval by the end of Q1 FY2023.

3.3 Develop your cost optimization roadmap

3 hours

  1. Conduct a final feasibility check of your prioritized shortlist of initiatives. Do they make sense, are they achievable, and do they all contribute individually and collectively to reaching your cost optimization goals?
  2. Begin operationalizing your overarching plan on paper in the form of a roadmap.
    • Give each initiative a working project name that makes sense to business stakeholders and fine-tune its definition and scope.
    • Assign IT accountability for each initiative and list stakeholders who you’ll need support and/or sponsorship from.
    • Discuss the resources required to carry out each initiative (time, skills/staff, money, authority, etc.).
    • Walk through the order in which you plan to tackle each initiative and make adjustments.
  3. Document your final roadmap – including initiatives and relative time frames for execution – in the Cost Optimization Roadmap templates provided.

See the next two slides for two Cost Optimization Roadmap templates: one sunrise diagram and one Gantt chart.

Input Output
  • Outputs from step 3.2
  • Draft of your Cost Optimization Roadmap
Materials Participants
  • Info-Tech’s Cost Optimization Roadmap templates
  • CIO/IT Director
  • IT Financial Lead
  • Other IT Management

TEMPLATE & EXAMPLE

The image contains a screenshot of the IT Cost Optimization Roadmap.

TEMPLATE & EXAMPLE

The image contains a screenshot Template Example to demonstrate focus areas, their initiatives, and completion during the cycle.

3.4 Build the communication plan

45 to 60 minutes

  1. Use the Cost Optimization Communication Plan templates and guidance on the following slides.
  2. Complete the template to develop your communication plan for your cost optimization proposal and initiatives. At a minimum, it should include:
    • Steps for preparing and presenting your proposal to decision-makers, sponsors, and other stakeholders, including named presenters and points of contact in IT.
    • Checkpoints for communication throughout the execution of each initiative and the cost optimization roadmap overall, including target audiences, accountabilities, modes and methods of communication, type and scope of information to be communicated at each checkpoint, and any decisions or approvals.

See the next three slides for guidance and templates to build your Cost Optimization Communication Plan.

InputOutput
  • Cost Optimization Roadmap
  • Completed draft of the Cost Optimization Communication Plan
MaterialsParticipants
  • Cost Optimization Roadmap
  • Info-Tech’s Cost Optimization Communication Plan template
  • CIO/IT Director
  • IT Financial Lead
  • Other IT Management

Know the communication strategy’s purpose

Put as much effort into developing your communication strategy as you would into planning and executing the cost optimization initiatives themselves. Don’t skip this part!

Your communication strategy has two major components…

  1. A tactical plan for how and when you’ll communicate with stakeholders about your proposals, activities, and progress toward meeting cost optimization goals.
  2. An executive or board presentation that outlines your final proposed cost optimization initiatives, their respective business cases, and resources/support required with the goal of gaining approval to execute.

Your communication strategy will need to include…

  • Answers to the “What’s in it for me?” question from all impacted stakeholders.
  • Roles, responsibilities, and accountabilities before, during, and after initiatives are completed.
  • High-level information about scope, dates, deliverables, and impacts of the specific changes being made

You will also develop more detailed operational and project plans for each initiative at a later date.IT will use these plans to manage and track the execution of individual initiatives when the time comes.

TEMPLATE & EXAMPLE

Document the overall what and why about your planned communications

Component

Purpose

Context

Key Messages

Intended Outcomes

Definition

Description of the topic and why you’re communicating with this specific audience right now.

Background information about the broader situation and how you got to where you are today.

The main points you want your target audience to hear/read, absorb, and remember.

What you hope you and your audience will get at the end of the communication or effort.

Our Language

  • IT is proposing an organization-wide array of initiatives to reduce IT costs. We are seeking your approval and support to carry out these initiatives.
  • The economy is in active downturn and may enter a full recession.
  • IT is anticipating mandatory cost reductions and has opted to take a proactive position.
  • We used an analytical framework to look at all areas of the organization to identify and prioritize IT cost-reduction opportunities.
  • IT is being proactive.
  • IT is sensitive to the business.
  • IT needs your support.
  • IT is committed to keeping you informed at every step.
  • IT wants to position the organization for rapid recovery when the economy improves.
  • IT is paving the way for a long-term IT cost optimization program that will enable an agile response to changing business conditions.
  • Buy-in, approval, and ongoing support for cost optimization initiatives proposed.
  • Update on the status of specific initiatives, including what’s happened, progress, and what’s coming next.

TEMPLATE & EXAMPLE

Next, note the who, how, and when

Approvers

Initiatives

Impact

Format

Time Frame

Messenger

CEO

  • Reduce number of Minitab licenses
  • Defer hiring of new data architecture position
  • Cancel VR simulation project
Indefinitely delays current strategic projects

Monthly meeting discussion

Last Wednesday of every month starting Oct. 26, 2022.

CIO, IT data analytics project lead, IT VR project lead

IT Steering (ITS) Committee

  • Adjust service level framework and level assignments
  • Eliminate extra Adobe versions/licenses
  • Postpone purchases for network modernization
  • Postpone workstation/laptop upgrades for non-Production functions
  • Outsource data analytics project
  • Rescope SharePoint optimization project
  • Move to BYOD for cellphones
  • Outsource security threat monitoring

Nearly all of these initiatives are enterprise-wide or affect multiple departments. Varying direct and indirect impacts will need to be independently communicated for each initiative if approved by the ITS.

presentation at quarterly ITS meetings

Monthly progress updates via email bulletin

Approval presentation: Oct. 31, 2022

Quarterly updates: Jan. 31, April 28, and July 28, 2023

CIO, IT service director, IT infrastructure director, IT data analytics project lead

VP of Sales

  • Pause Salesforce view redesign project

Delays new sales tool efficiency improvement.

Meeting discussion

Nov. 2022

CIO, IT Salesforce view redesign project lead

3.5 Build the executive presentation

45 to 60 minutes

  1. Use the Cost Optimization Executive Presentation template from the Appendix of this guide.
  2. Update the contents of the template with the outputs of your Cost Optimization Roadmap and data/graph elements from the Cost Optimization Workbook.
  3. Conduct an internal review of the final presentation to ensure it includes all the elements you need and is error free.
  4. Book time to make your presentation to the executive team to gain approval for your cost optimization plan. Plan time after the presentation to field questions, engage in follow-up information sessions with approvers and stakeholders, and incorporate any feedback or amendments.

Note: Refer to your organization’s standards and norms for executive-level presentations and either adapt the Info-Tech template accordingly or use your own.

See the Appendix of this special brief blueprint for the Cost Optimization Executive Presentation template

Input Output
  • Cost Optimization Workbook and Cost Optimization Roadmap
  • Completed draft of the Cost Optimization Executive Presentation
Materials Participants
  • Cost Optimization Workbook
  • Cost Optimization Roadmap
  • Info-Tech’s Cost Optimization Executive Presentation template
  • CIO/IT Directors
  • IT Financial Lead
  • Other IT Management

An executive presentation needs to be short and focus on the essentials

Recommended content

  • Method: Overview of the analytical and decision-making process used to develop the proposed cost optimization roadmap.
  • Current state: The placement of the organization and IT in the business cycle framework.
  • Focus: Specific areas examined for cost optimization opportunities.
  • Goals: Summary of specific cost optimization targets in written and/or graphical form.
  • Initiatives: List of initiatives proposed that will achieve cost optimization goals.
  • Impact: Summary of estimated actuals to be achieved by the proposed initiatives. Can include other impact information.
  • Roadmap: Gantt chart and/or sunrise diagram showing initiatives by their relative time frame for execution.
  • Next steps: Summary of actions to come, such as approval, detailed planning, and communication.

Lay out the rational, then make the ask.

Summary of Accomplishment

  • This special brief blueprint helped to establish an effective approach to cost optimization within the context of a “reactive” paradigm typically required in times of economic recession. Additionally, it laid a framework for a strategic approach that will help your cost optimization efforts scale to proactive and strategic positions in the future.
  • Tactically, this research helped you to customize Info-Tech’s Cost Optimization Executive Presentation template to help communicate rationale for proposed IT cost optimizations. Next steps should involve delivering that presentation to your executive to gain their buy-in for your action plan.
  • If you would like to discuss this blueprint in greater detail with one of our expert analysts, contact your account manager to set up an appointment.

If you would like additional support, have our analysts guide you through an Info-Tech workshop or Guided Implementation.

Contact your account representative for more information.

workshops@infotech.com

1-888-670-8889

IT Cost Analysis & Optimization Workshop Overview

Contact your account representative for more information.
workshops@infotech.com 1-888-670-8889

Session 1

Session 2

Session 3

Session 4

Session 5

Understand Your Mandate & Objectives

Outline Initiatives for Vendors & Assets

Outline Initiatives for Projects & Workforce

Develop an IT Cost Optimization Roadmap

Communicate & Execute

Activities

1.1 Understand your organization’s cost optimization objectives and how this impacts IT.

1.2 Review potential cost optimization target areas based on your ITFM Benchmarking Report.

1.3 Identify factors constraining cost optimization options.

1.4 Set concrete IT cost optimization goals.

1.5 Identify inputs required

2.1 Identify a longlist of possible initiatives around:

  • Vendor contract renegotiation, cancelation, etc.
  • Asset lifecycle management, investment deferral, repurposing, etc.

2.2 Estimate the business impact and risk profile of cost optimization initiatives.

3.1 Identify a longlist of possible initiatives around:

  • Project priorities, project backlog reduction, project intake restructuring, etc.
  • Workforce productivity, skills, redeployment, etc.

3.2 Estimate the business impact and risk profile of cost optimization initiatives.

4.1 Assess feasibility of each initiative given cost optimization goals.

4.2 Prioritize cost optimization initiatives to create a final shortlist.

4.3 Fine-tune key information about your final cost optimization initiatives and develop a cost optimization roadmap for proposal.

5.1 Outline components of a communication plan, including approvers, stakeholders, and governance and management mechanisms to be used.

5.2 Create an executive presentation.

5.3 Set up review time for workshop deliverables and post-workshop activities.

Deliverables

  • Guiding principles for making IT cost optimization decisions.
  • Longlist of possible cost optimization initiatives and their impact for vendor management and asset optimization.
  • Longlist of possible cost optimization initiatives and their impact for project prioritization and workforce optimization.
  • Prioritized list of key cost optimization initiatives, descriptions and estimated impact, and roadmap.
  • Your IT cost optimization communication plan and presentation strategy.

Cost Optimization Executive Presentation

[Date]

EXECUTIVE BRIEF

[Organization name] IT engaged in a three-step IT cost optimization planning process

Step 1

Step 2

Step 3

Plan and Define Goals

We explored the current business context that our organization is operating within and the organization’s strategic goals to sustain and grow.

Next, we analyzed IT’s role in relation to our organization’s business context and goals and how we could better optimize IT costs in support of current business mandates.

Identify Cost Optimization
Initiatives

We engaged in an exercise to identify potential IT cost optimization initiatives specifically in the areas of vendor management, asset optimization, project prioritization, and workforce optimization.

Each initiative was assessed according to its scope, business impact, risks, and feasibility.

Prepare an Action Plan

We conducted an initiative alignment and prioritization exercise to develop a final shortlist of cost optimization actions, consolidating them into a detailed cost optimization strategic roadmap.

Next, we developed a plan for communicating with the broader organization about the plan and created an executive presentation.

The business is in [economic state] and IT must operate in [IT response mode] mode

The image contains a screenshot of a template to demonstrate the business cycle.

IT proposes a [X%] [reduction/increase] in IT costs by [date]

Current IT budget = [$]

Business Cycle Mandate

Goals

Approach

1
  • [Mandate]
  • [Goal]
  • [Goal]
  • [IT response mode]
  • [Main tactics to be pursued]
2
  • [Mandate]
  • [Goal]
  • [Goal]
  • [IT response mode]
  • [Main tactics to be pursued]
3
  • [Mandate]
  • [Goal]
  • [Goal]
  • [IT response mode]
  • [Main tactics to be pursued]

Proposed IT cost optimization initiatives and targets by priority

Initiative Priority Time Frame Potential Savings Focus Area Approver
[Initiative] 1 [Due date/period] [$] [Vend/Asset/Proj/Wkfrc] [Name/Title]
[Initiative] 2 [Due date/period] [$] [Vend/Asset/Proj/Wkfrc] [Name/Title]
[Initiative] 3 [Due date/period] [$] [Vend/Asset/Proj/Wkfrc] [Name/Title]
[Initiative] 4 [Due date/period] [$] [Vend/Asset/Proj/Wkfrc] [Name/Title]
[Initiative] 5 [Due date/period] [$] [Vend/Asset/Proj/Wkfrc] [Name/Title]
[Initiative] 6 [Due date/period] [$] [Vend/Asset/Proj/Wkfrc] [Name/Title]
[Initiative] 7 [Due date/period] [$] [Vend/Asset/Proj/Wkfrc] [Name/Title]
[Initiative] 8 [Due date/period] [$] [Vend/Asset/Proj/Wkfrc] [Name/Title]
[Initiative] 9 [Due date/period] [$] [Vend/Asset/Proj/Wkfrc] [Name/Title]
[Initiative] 10 [Due date/period] [$] [Vend/Asset/Proj/Wkfrc] [Name/Title]
[Final due date] [Total $]

Estimated actuals for selected initiatives [fall short of/meet/exceed] initial targets

Summary of Initial Targets
Current IT budget [$]
[Target 1] [$]
[Target 2] [$]
Total cost-reduction target [Total target $]
Summary of Estimated Actuals
Estimated actual [target 1] [$]
Estimated actual [target 2] [$]
Estimated actual [Total estimated actual $]
Estimated actual IT budget by [final due date] [$]
  • [Note/comment]
  • [Note/comment]

IT cost optimization roadmap

The image contains a screenshot of the template of the IT cost optimization roadmap.

Gantt chart view of the roadmap

The image contains a screenshot of the Gantt chart view of the roadmap.

Next steps

1

Gain your approval and support to execute initiatives.

We are asking you to review our recommendations and suggest alterations as needed. We are happy to show you the raw data and decision-making process that led us to the recommendations in this document.

2

Develop detailed project plans for individual initiatives where needed.

Once there is consensus on our course of action, we will develop detailed plans to achieve cost and optimization goals. This will include building a timeline for acting on initiatives and achieving the estimated results.

3

Begin regular communications with affected stakeholders about the initiatives and their progress.

Once a timeline is developed, we will implement a communication plan to ensure these cost optimization measures have minimal negative impact. Tactics will include answering “what’s in it for me” questions from all impacted stakeholders; identifying roles and responsibilities before, during, and after the initiatives are completed; and providing key dates, deliverables, impacts, and descriptions of specific changes being made.

Questions?

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Consulting

“Our team has already made this critical project a priority, and we have the time and capability, but some guidance along the way would be helpful.” “Our team knows that we need to fix a process, but we need assistance to determine where to focus. Some check-ins along the way would help keep us on track.” “We need to hit the ground running and get this project kicked off immediately. Our team has the ability to take this over once we get a framework and strategy in place.” “Our team does not have the time or the knowledge to take this project on. We need assistance through the entirety of this project.”

Diagnostics and consistent frameworks used throughout all four options

About Info-Tech

Info-Tech Research Group is the world’s fastest-growing information technology research and advisory company, proudly serving over 30,000 IT professionals.

We produce unbiased and highly relevant research to help CIOs and IT leaders make strategic, timely, and well-informed decisions. We partner closely with IT teams to provide everything they need, from actionable tools to analyst guidance, ensuring they deliver measurable results for their organizations.

MEMBER RATING

8.9/10
Overall Impact

$60,535
Average $ Saved

8
Average Days Saved

After each Info-Tech experience, we ask our members to quantify the real-time savings, monetary impact, and project improvements our research helped them achieve.

Read what our members are saying

What Is a Blueprint?

A blueprint is designed to be a roadmap, containing a methodology and the tools and templates you need to solve your IT problems.

Each blueprint can be accompanied by a Guided Implementation that provides you access to our world-class analysts to help you get through the project.

Talk to an Analyst

Our analyst calls are focused on helping our members use the research we produce, and our experts will guide you to successful project completion.

Book an Analyst Call on This Topic

You can start as early as tomorrow morning. Our analysts will explain the process during your first call.

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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 set the direction for your next project step.

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Authors

Jennifer Perrier

Graham Price

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