Here are 10 ways that CIOs can recapture the trapped value within IT organizations, such as implementing a governance process for IT service delivery.
These causes produce a common result: they constrain the value that IT can demonstrate to the business. Detailed root-cause analysis is key to creating the right range of solutions for a given organization–and when executed appropriately, pragmatic and straightforward solutions can free up millions of dollars in efficiency for IT delivery without an increase in overall investment for delivering IT solutions. Some incremental short-term investment may be necessary to attain the desired changes, but the return on these investments is achievable within 1 to 3 years.
Top 10 Ways to Uncover Hidden IT Delivery Value
While the solution sets for each individual IT organization results in differing effort and priorities for the solutions, below are the top 10 ways to recapture trapped value within IT delivery organizations:
1. Implement a governance process for IT service demand. The process must integrate project investment decisions with the associated human and technical resources required to execute on them. Our own project work has resulted in 1-2 percent yearly savings in discretionary project spend by optimizing resource utilization on the labor side alone.
2. Establish planning processes. These measures should support continuous evaluation and decision making on project investment independent of the financial planning cycle, thereby resulting in an evergreen prioritized list of discretionary activity.
3. Use business-driven value and outcome definitions in the project prioritization and decision making processes. More than 3 percent savings on the IT portfolio can be generated through effective portfolio prioritization via elimination of duplicate activities.
4. Use the resulting value-based constructs to consistently monitor and evaluate project performance. This includes shutting down projects when internal or external changes warrant it.
5. Consolidate delivery accountability within fewer roles, both within IT and the business. This helps create clear ownership of technology enablement within each business and functional area. Appropriately delegated decision making can save 1-2 percent of project labor time on a yearly basis.
6. Create a project delivery framework. This should be aimed at driving innovative and flexible delivery methodologies (e.g., tailorable SDLC) as well as adoption of cloud-based solutions (e.g., aggregating IaaS, PaaS and SaaS into business solutions) that balance achievement of business results with strategic outcomes and risk.
7. Identify, support, enable and develop IT leaders that demonstrate enterprise-level thinking. This includes individuals who consistently support the vision set by senior leadership.
8. Integrate enterprise architecture capabilities into upfront project planning. This will help provide a mechanism to align individual project decisions with long-term technology roadmaps and market-driven technological innovation. Although industry estimates vary, the savings from platform consolidation and associated landscape rationalization are substantial–on the order of 5 percent or greater of OPEX expenditures.
9. Ensure that the delivery model supports appropriate cross-functional involvement. This must be done upfront during the definition and scoping process should be holistic in full life cycle planning from initiation through retirement and decommission. Involve suppliers responsible for platform and application sustainment. Typical data centers are, on average, one-third utilized. Significant savings can be realized through more efficient use of existing infrastructure on new projects.
10. Create and refine IT metrics. These metrics should integrate value definition and realization throughout the life cycle and hold owners accountable for realization of value and managing changes to the business case throughout the project life cycle (e.g., provide updates on NPV changes for in-flight portfolio or comparisons of ROI on projects implemented in previous 12 months to plan).
In this ever more competitive IT environment, where the pressure on CIOs and COOs is mounting to increase the demonstrated ROI of IT, it is critical to investigate areas where value has been trapped. With the right strategies, CIOs can realistically generate a minimum of a 10 percent reduction in IT spend (or, conversely, a 10 percent improvement in delivered value). Much more can be wrought from most IT environments by analyzing the delivery mechanisms, achieving a paradigm shift in solutioning, and eliminating bureaucracy, wasted effort and overly rigid decision making.
About the Authors
Steve Keegan and Craig Wright are principals at Pace Harmon, an outsourcing advisory services firm providing guidance on complex outsourcing and strategic sourcing transactions, process optimization, and supplier program management.