Under Siege - Storming the IT cost cutting barricades

[#1]

In these times of austerity, IT departments find themselves under pressure to cut costs. Eventually they will reach a point where everything that can be done within the walls of IT has been done. But, the relentless drive for savings will keep them under siege. Now is the time for IT departments to form their battle plan and break out of the cycle…

Stage 1: Defence

The first part of the battle plan is ensuring that IT can defend its position. This means demonstrating that all possible cost savings within IT have been achieved. The checklist for IT defence includes:

• all IT tools, assets and environments are standardised
• all internal IT processes have been assessed with activities, and
• tasks have been automated, eliminated or transferred elsewhere (self-service, offshoring) wherever possible.

The upshot is that IT is as efficient as it can be, based upon the constraints that the business environment imposed upon it.

Stage 2: Intelligence

The second stage of the battle plan is gathering intelligence. This requires looking across each business unit to identify inconsistences. Specifically, we are looking for where the same function is being performed in each business unit but in a different way, thus causing IT to deviate from a standard operating model. This is common in organisations which have grown through acquisition or where the organisation dispersed globally (multiple apps doing the same job). IT needs to articulate that if the business standardises its Operating model, further efficiencies can be achieved. Standardisation also enables the business to share its services to create saving, improve quality and time to market. There may be good reasons for business units to operate differently depending upon local markets; however this should not stop IT from questioning the need for variation.

Stage 3: Engagement

The third stage – engagement – is the most delicate part of the battle plan. Getting it wrong will reinforce the siege position. There are two tactics to consider, either collaborate with each business unit working to help standardise their operating model (getting the business units to drive the change), or executive top-down driven change where business units are directed to adopt a standard business operating model. The key here is to find out where the real drive to cut cost is coming from – the business units or the executive. In either case the story is the same; “IT has done all it can do. To do more means to changing the way things are being done by the business…. and here is the evidence….”

Stage 4: Momentum

The fourth stage is about building and maintaining a change in momentum. This means creating a transformation plan and building the capability and capacity required to make the change. This will require investment in people, tools and, if necessary, external expertise.

When IT is under siege, the best defence is a good offense. In this case, IT needs to go on the offense against hidden costs caused by non-standard operating practices inside business units. Going further, IT can identify opportunities that will move the conversation from cost to value, such as Applications Modernisation, Re-hosting Services and Applications Portfolio Rationalisation.

You can always check out our previous Knowledge Matters articles on the HP Applications Services blog.

Related links:

• Other blogs by Gary White
• HP Applications Transformation Solutions

About the author

Gary White, Managing Consultant, Business Transformation and Value Management, Hewlett Packard Company

Gary White is a Managing Consultant and thought leader for Hewlett Packard’s EMEA Industry Transformation Consulting practice. He has 30 years of operational and consulting experience in the application of Value Management and Management of Change. Gary has worked in a variety of industries including Defence, Healthcare, Department of Work and Pensions, Transport, Criminal Justice, Manufacturing and Energy.

Contact Gary on: Twitter and LinkedIn

[#2]

Gary,

Enjoyed the insight but would also add to the "Defence" phase that enterprises should also look at Consolidation of Infrastructure and also at the commercial arrangements around their operating systems. Often there are savings to be made by moving to more open operating systems and escaping restrictive contracts and high licensing costs. An example would be for Enterprises to move from legacy UNIX operating systems (e.g.. AIX, Solaris,) to LINUX. Both consolidation and the move to open operating systems, can also be a sound foundation for more strategic moves such as to Cloud.

[#3]

War or game?

[#4]

I am sorry but the attitude is frankly unethical.

As far as I understand (I believe I do understand), you suggest (under cover) that departments start blaming each other and digging a grave for each other so that the IT market can keep bigger even if this services cannot be afforded or even not needed, just for the sake of keeping “the IT kingdom”?!

>> The key here is to find out where the real drive to cut cost is coming from – the business units or the executive. .... 

And what if this drive is simply the market of the company, which is hosting the IT department (under siege!) has squeezing margins and reduced sales….

Why not suggest being cooperative and working as a team not only within a department but across departments... and for this attitude the words "defense" and "siege" are frankly inappropriate...

I am really happy that this is a “defense attitude”, which our IT people do not have.

[#5]

Hello Blessio,

Thank you for your comments in which you raise some interesting points.

Please be reassured that I am not proposing or supporting any unethical behaviour.

I am pleased that you are working in an organisation where the business and IT are aligned. In my view this needs to the ultimate goal for organisations. Unfortunately, not all organisations are in such an advantageous position and some may well feel “Under Siege”.

So, I am prompting IT departments “to be bold” as I believe that they are in a relatively unique position to help the whole business succeed. To do this they must get their own house in order (defence). They are also in a position to identify additional economic efficiencies, but are constrained by business units operating in silos e.g. each unit many have a different process and application for the same business function. I believe that IT departments are in a good position to identify these potential anomalies and opportunities to light (intelligence). Incidentally, this would reuse IT costs and therefore the “IT kingdom”.

You are absolutely correct in saying that you can only succeed when business units and IT co-operate. Where business units and IT are tasked with saving targets separately can contribute to the “Siege” mentality and to “defend ones turf”. When working together, IT and business units start to figure out how they can help each other this is when the full value is realised (engagement). This is obviously the culture in your organisation, which is good to hear.

But something needs to trigger the serious conversation between IT and business units, I am hopeful that this blog may stimulate such conversations...

[#6]

Hi all,

Very nice blog that shows how IT could shape its tactical moves, and escape from their isolation into a more collaborative appraoch. As Gary rightly pointed out a serious conversation between business and IT is needed. The challenge is how to start this conversation. The blog has explained how sometimes this may get out of hand, and IT departments get isolated.

One common mistake I have learned is that IT seeks the solution within their IT perspective although it resides in broadening the scope and adding other disciplines to the approach. One promising one may be business architecture.

Why do I believe this? First of all because whatever IT tries to convince the business of, it should use the language that the business audience can understand. And, IT in general has not succeeded doing that. Why? Because IT is build on the practice of engineers and of architects with a technology perspective. Their way of thinking and way of working are too different from business stakeholders.

A second common mistake I have learned is that the way business formulates its needs, is not well aligned with its audience of IT stakeholders. There should be something in between. And, this is not mere collaboration. Rather it is a practice that should be developed, and this practice can be executed by business architects. You may have a look at my blogs on this topic. http://bit.ly/ZVARoq

Sorry for promoting these blogs, but they build on the ideas presented in this blog.

Kind regards

Harry