cost optimization techniques and success strategies

There is no sustainable cost optimization without proper cost management. Outstaffing does not just give you access to a wider pool of talents; it also enables you to access critical infrastructure on-demand, effectively eliminating the overhead that comes with hiring and onboarding permanent workers, as well as maintaining their services. However, note that virtualization often requires some initial costs for setting up servers and the likes. Additionally, it will refresh and improve your understanding of core cost and performance improvement techniques … Learn more about our Privacy Policy. Demystifying cost based optimization Riyaj Shamsudeen. Business leaders should look embrace this new decision-making power and use it to … The importance of a cost-effective and flexible IT system. That figure is expected to drop to $3.6 billion in 2020, due to the impacts of COVID-19, which has forced companies to embark on cost … Optimization Cost reduction can be achieved with four different programs Digital Transformation A digital transformation program seeks to introduce more digital tools, processes and strategies to change the way a business operates via: Application Modernization Digital Transformation Digital Strategy Ecosystem Optimization … What is IT cost optimization? Must-focus areas for when you're ready to move beyond simple expense trimming. And in a world where time is money, the rest is history. Gartner’s decision framework is established on 6 pillars, consisting of questions you must ask before embarking on a cost optimization move. Required fields are marked *. The world spent $3.8 trillion on IT expenses in 2019 alone. It is more cost-effective to use cloud-hosted services and pay on-demand than to keep physical infrastructure indefinitely. And the average cloud budget expanded by 59% over the same period. Strategic cost optimization techniques prepare organizations for growth by striking the right balance between reduced IT spend as a percentage of revenue and increased investments in business innovation and IT improvement initiatives. In addition, you need a control measure in order to ensure that you stay within budgetary limits and prevent abuse. Say, an organization wants to automate account management, for instance, it needs people who can handle the tech, but also people who understand the finance aspect. Organizations adopt new technologies to transform their processes. Plan which areas to optimize by using pragmatic methodologies. Gartner tells the following story to illustrate the point: The CIO at a large university in the United States faced a budget cut of nearly 10%. The end goal of the strategic optimization of IT expenses is to maximize value, that is, to do more with less, rather than cutting costs for its own sake. All rights reserved. Businesses invest in technologies and tools that they don’t need just because that is what is trending. That’s a CAGR of 4.5% within the next five years. Our site uses cookies and other technologies to collect data to analyze our site’s traffic and to improve the quality of services. When an IT business optimizes expenses, it is structured around reducing expenses in order to maximize business value. Otherwise, you must eliminate excesses and streamline processes to achieve cost efficiency in IT spending. Cost Optimization. Optimizing the cost of IT services requires visibility of all the … Additionally, it will refresh and improve your understanding of core cost and performance improvement techniques … The definition of cost reduction, according to Wikipediais: “The process used by companies to reduce their costs and increase their profits. 10 IT Cost Optimization Techniques for Private and Public Sector Organizations, Use Zero-Based Prioritization to Reevaluate Your Project Portfolio, Gartner clients can read more in the report “Ten Ideas for Business Cost Optimization in the Age of Digital Business” and "The Gartner Top 10 Recommended IT Cost Optimization Ideas, 2016.". The primary objective of this interactive course is to provide practical skills, techniques and greater confidence to enable you to plan, manage and deliver strategic cost optimisation programmes. Tete-a-tete with our partners is a good idea! Manufacturing cost reduction efforts can result in significant product cost savings, manufacturing cost saving, and life cycle cost saving especially when companies implement all ten of the following strategies for manufacturing cost … Cost management requires creative problem-solving skills and a thorough understanding of the factors that affect project costs. ... 7 ways to position IT for success in 2020 Subscription 2. For one, virtual servers have a reduced deployment time. The aim is not simply to save costs; the aim is to boost business efficiency while at it. Gartner 2013 it cost optimization strategy, best practices & risks Satya Harish. Check the current system of cost optimization against these 10 recommended focus areas to exploit information technology to improve business outcomes. Will You Require Employees to Get a COVID-19 Vaccine? “The key to effective enterprise cost optimization is to have proactive processes in place as part of business and technology strategy development to continually explore new opportunities.”, Prioritize your cost initiatives by business outcome. Moving operations to the cloud is not the end of optimizing IT costs; it is the beginning. Virtualizing databases is quite complex and seems high level, but the end result, which is greater flexibility and productivity, far outweighs arguments against this measure. Having understood that cost optimization in IT is about maximizing value, the question is how do we determine value? It requires an overarching strategy to maximize the value of IT expenses and build up to the transformation of the company. Upon this realization, businesses have been pivoting to software-as-a-service models. Business and IT leaders need to understand that technologies can outsmart neither the people that use them nor the processes that back them. Learn proven strategies and techniques for compute, storage, network, and data analytics cost optimization on Google Cloud. Why? The cloud helps you to improve your operations and innovate better. This explains why simple cost-cutting is not enough. Get our clients’ contacts to discuss their experience with us! Virtualization. 1. It might take up to 48 hours before you can use all C… Check the current system of cost optimization against these 10 recommended focus areas, “Cost optimization in the age of digital business means that organizations use a mix of IT and business cost optimization for increased business performance through wise technology investments,” says John Roberts, research vice president and distinguished analyst with Gartner’s CIO and Executive Leadership team. The primary objective of this interactive course is to provide practical skills, techniques and greater confidence to enable you to plan, manage and deliver strategic cost optimisation programmes. That example shows how outstaffing can be a source of affordable, efficient services. Virtualization removes the overhead expenses on physical servers, licensing costs, and so on. But IT outstaffing is not merely a cost reduction technique; it is one that drives business growth, hastens delivery, and improves agility. Using the cloud, you can choose the resources you want and pay for those alone, rather than paying for a whole system of which you use only a small part. More and more companies are outstaffing their IT operations in a bid to save costs. You can find prescriptive guidance on implementation in the Cost Optimization … However, there exist limitations in terms of the traditional resource leveling problem based on the fixed project duration. the success of cost reduction activities without the focus on one particular instru- ment like ABC. Our last blog post debunked some infamous falsehoods about operational excellence in financial services. The goal of channel optimization is to assess the various ways customers interact with a bank in order to create a cost-effective combination that is adapted to each bank’s specific customer base. The global IT outstaffing market was worth about $334 billion last year and it is expected to have increased to $398 billion by 2025. Many tech companies are entirely virtual, yet have climbed up the ladder of prominence and efficiency. Many people mistake cost-cutting for cost optimization. But project managers also need an understanding of cost management strategies and techniques to perform their duties. Many cloud platforms, examples including Google Cloud, Azure, and AWS, build IT cost optimization services into their platform in the form of monitoring. There is no better time for businesses to reassess their standing regarding IT spending, determine cost-cutting opportunities, and rethink their strategy towards optimal value delivery. Transparency gives you a complete view of how money flows in and out; that would help you to make smarter (fact-based and data-driven) budgetary and investment decisions. Before you embark on a move to optimize costs, the foundation is to gain visibility into the current state of IT spending in your organization. Software Maintenance & Subscriptions. But without the right people in place to harness those tools, it will all fall apart. Gain visibility across your hybrid IT. … Outstaffing is “still seen as an enabler of business transformation”, quoting the Deloitte report. Our most successful clients focus on ways to improve costs, profits, and flexibility by reducing manufacturing costs. “The key to effective enterprise cost optimization is to have proactive processes in place as part of business and technology strategy development to continually explore new opportunities.”, Gartner clients can read more in the report, Ten Ideas for Business Cost Optimization in the Age of Digital Business, "The Gartner Top 10 Recommended IT Cost Optimization Ideas, 2016. We focus our initial attention on … In addition, this study wants to show ho w these behavioral factors In order to cut costs effectively, companies must connect costs to their strategy. Those three areas (people, process, and technology) are complimentary. However, when many businesses say they are optimizing IT costs, what they are really doing is simple cost-cutting. Follow a structured and systematic approach to identify key areas for improvement and potential quick wins. According to Deloitte’s 2020 Global outstaffing Survey, cost reduction is the primary reason businesses outsource, at least, for 70% of the people surveyed. It is an elaborate strategy that you must prepare adequately for if you want to be successful. What makes up IT cost optimization is a series of strategic measures aimed at getting more out of less. This helps you to determine anomalies in spending patterns and correct them before they spread wide the organization. According to KPMG, IT organizations need to reexamine their costs to determine their readiness for the future. Cloud cost optimization improves forecasting and cost predictability and provides visibility into usage patterns to right size for organizations’ specific needs and can help identify mismanaged resources, reserving capacity for higher discounts, and right-sizing services to scale. We are talking about consultants, senior developers, and other IT professionals, all hired for more affordable rates. Depending on a company’s services or product, the strategies can vary.” (Wikipedia) While the Wikipedia definition is straightforward, the path to cost reduction for manufacturers is actually the exact opposite. Likewise, updates are delivered seamlessly on cloud resources, and they don’t have a shelf life like physical infrastructure do. Virtualization is one of the methods that can help you achieve significant cost … Don’t underestimate the value of analytics beyond … For many businesses and organizations, cost reduction programs are focused on cost-cutting. This paper does not provide implementation details or architectural patterns, however, it does include references to appropriate resources. Cost optimization is, first, a financial matter. ", Gartner Top 10 Strategic Technology Trends for 2018, Gartner’s Top 10 Strategic Technology Trends for 2017, Top Trends in the Gartner Hype Cycle for Emerging Technologies, 2017, Gartner Top 10 Strategic Technology Trends for 2019. As such, cost … Today, cost optimization can be a great indicator of a successful and strategic partnership. Oil and … © 2021 Gartner, Inc. and/or its affiliates. And when we talk about the right people, we are not only referring to information tech-aptness. You’ll learn how to: Gain visibility and draw cost … That would inform the areas where expenses must be cut. Organizations may have exhausted the low-hanging fruit for saving money, but to be successful cost optimization should be a continuous exploration of technology that adds business value. You want to reduce expenses and spend on the right things. To be clear, IT cost optimization techniques include cost-cutting; of course, you can’t optimize cost without eliminating some expenses. Instead, her strategy was to create a more transparent view of IT, which helped the university’s key stakeholders understand their IT expenses and how IT business services affect the organization’s performance. Save my name, email, and website in this browser for the next time I comment. In the end, the purpose of the technology is to derive business value from it. Cost reduction, as related to any business, is just as it sounds. Aligning cost containment strategies and measures with key bottom-line metrics will help stabilize businesses in the current cost-conscious environment and stay competitive in the long run. Your email address will not be published. Cost Optimization Cost optimization … Cost optimization training. It is an indicative visualization of the effort required and the relative risks and benefits of various initiatives that make the IT cost reduction system. Given the rapidly changing nature of customer channel preferences, this process of optimization … Cost-cutting is one-time, but optimization is continual. Replacing physical infrastructure with virtual components is a great way to reduce costs while boosting operational efficiency. Improving business efficiency through analytics. For more information about scopes, see Understand and work with scopes. Download We’ve been working side by side with some … The answer is the IT cost optimization framework, and it all boils down to priorities. Recommendations are available for a variety of scopes and Azure account types. The study of traditional resource leveling problem aims at minimizing the resource usage fluctuations and obtaining sustainable resource supplement, which is accomplished by adjusting noncritical activities within their start and finish time. This time, we’re going to delve … The right people must also understand the process and strategy. You must have at least read access to one or more of the following scopes to view cost data. This removed the hassle of hiring and onboarding new developers, as well as the costs associated with it. But the aim of every investment is profit-making and you want to ensure that your IT infrastructure is delivering value commensurate to your investment. The heightened sense of … Your email address will not be published. This, management teams must figure out the best IT cost optimization is, first a... Transformation of the differences between cost optimization training your company in implementing a cloud model goes beyond. 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