IT Management Slideshow: Three Levers of IT Cost Control

By CIOinsight  |  Posted 05-14-2009

Three Levers of IT Cost Control

1. IT Spend Flat

Over next two years, Hackett found that companies expect to grow IT budgets by only about 1 % annually, down from 5.3 % over the last three years.

Three Levers of IT Cost Control

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2. The Need for IT Grows

Meanwhile, the same organizations project demand for IT services will drop to 8.6 % per year, from 15%, creating a total growth demand of 17 % by the end of 2010.

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3. Three Levers

Hackett identifies three levers for cost control: IT cost control strategies, IT demand management, and discretionary cuts.

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4. IT Cost Control Strategies

Of the three levers, Hackett calls IT Cost Control Strategies the most mature and the tactic with the most potential to reduce costs without harming the business.

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5. IT Cost Control Strategies

Hackett puts the following activities within this category:

Offshoring/Outsourcing

IT reorganization

Architecture Rationalization

Process Improvement

Supplier/Contract Management

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6. IT Cost Control Strategies

Hackett suggests that an across the board goal of 10% cost reductions in this area is both realistic and achievable.

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7. IT Demand Management Techniques

In the past, most companies have focused IT Demand Management activities on simply meeting demand for IT, but Hackett says this technique can also be used to curb demand and better prioritize work.

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8. IT Demand Management Techniques

Hackett puts the following activities within this category:

Chargebacks/Cost Allocations

Service Catalog

Project Portfolio Management

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9. IT Demand Management Techniques

This is the most underutilized category, with only about 36 % of companies charging back or allocating IT cost. Yet IT Demand Management typically realized savings that slightly exceeded planned savings, with a net impact similar to IT Cost Control.

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10. Discretionary Cuts

Discretionary Cuts are what many organizations think of as ‘cuts' during downturns-basically, blunt force staff and budget reductions without any kind of underlying process improvement.

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11. Discretionary Cuts

Discretionary Cuts include cuts to :

Project budgets

Internal and external staff

Outsourcing contracts

Technology spend

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12. Discretionary Cuts

Hackett cautions on the sustainability of discretionary cuts; even though they offer similar or better savings impact as the other two pillars, they do nothing to address increasing demand for IT services.

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