Three Effective Ways to Optimise Your IT Spending
There is one area on which everyone concentrates when it comes to getting the most out of an IT budget: squeezing the supplier. Though getting commodity items at the best prices and achieving the most value out of the services and IT support costs you pay for is important, there are many other areas where careful consideration can result in far more optimal IT spending.
Deloitte’s 2016-2017 CIO survey found that, on average across all industries, expenditure on IT packages, staff and services accounts for 3.28% of a company’s turnover, with businesses in professional services industries commonly managing annual IT budgets of 6% of overall turnover. The importance of optimal spending is clearly very high. Here we outline a few of the top areas we think your business should focus on.
Rationalise and Standardise
Organisations usually attempt to co-ordinate IT expenditure to a highly optimised level, but what happens in practice often strays from this goal. Inevitably, despite planning and prioritising, some IT purchases will be made in an ad-hoc fashion. Over time, ad-hoc procurement leads to a mix of systems and services which are not always interoperable and which duplicates functionality. A regular, systematic audit of vendors and services is therefore essential. Such a review will first ensure that duplication is minimal.
A single system that is scaled across the organisation can often be serviced more cheaply in comparison to several systems serving the same technological purpose, running in parallel, each serving distinct departments. Equally important is interoperability: even if systems serve distinct purposes, it is important to make sure that these distinct systems can easily interact, and easily share data. Trying to ensure standardisation wherever possible leads to more efficient spending as less money goes towards making systems work together. The inevitable effects of ad-hoc spending over time means that only a regular review or audit will ultimately ensure consistent standardisation.
Enhance transparency and reduce complexity
It is difficult to uncover where IT expenditure is most effective, and least effective, when you are uncertain of how much your business is spending, and who the biggest spenders are. A lack of transparency can be make this task very difficult, to the extent that some businesses simply cannot fully account for all IT support costs. So, on the road to more efficient IT spending, it helps to try and surface all the different IT cost centres which are hidden in other departments such as marketing and HR.
Complexity is another culprit: diffuse decision making and complex arsenals of suppliers and providers creates a situation which is difficult to untangle when it comes to setting priorities. Instead, try to simplify the number of providers and suppliers you use and centralise decision making when it is appropriate. Keeping your IT regime simple also automatically helps your organisation avoid the duplication of systems, and makes it easier to standardise systems.
Global IT spending is forecast to hit $3.5 trillion in 2017 and $4.0 trillion by 2022, and an argument can be made that much of this spend is driven by corporate IT silos run by IT staff - functioning in a silo. It is important to note that opaque IT spending and overly complex spending patterns are often the result of a lack of engagement between the IT department, and its leaders, and the departments and leaders around the business. So, the third important step your company can take to improve the effectiveness of IT spending is to improve the level of communication between the IT department and other leaders in the business.
IT leaders and management teams should be closely engaging to align IT spending and business strategy. Staff with top roles in your technology operations can have a game-changing influence on the overall efficiency of your business if they are fully primed on what matters for your business and its stakeholders. Top IT staff members should sit in on meetings across the organisation so that they’re kept abreast of the entire organisational environment, and the future of the organisation. Instead of briefing the IT department after the fact, involve IT leaders from the start.