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Chris Pick (Global) - Increasing ROI by Effectively Managing the Business of IT (Part 2)

In Part I of this article, Chris Pick of Apptio outlined two methods of increasing ROI through effective technology management In Part II, he presents three additional strategies, including real-world scenarios from enterprise IT departments. 

1.    Cutting Costs

By allocating and breaking down all component IT costs, IT departments and company leadership can dramatically slash spending. With a detailed budget and usage breakdown in front of them, a CIO may determine that the company has been paying for servers that aren’t being utilized, and should eliminate that expense immediately. A CIO may even examine the cost of employees performing a certain IT task, compare it to an outside vendor, and decide it makes more sense to outsource the job.

For example, Saint Luke’s Health Care System - a nonprofit, 9,000 employee health care organization, wanted to more effectively manage the business of IT to cut costs and reduce expenditures during the national economic crisis in 2008. Saint Luke’s financial officers told CIO Debe Gash to find ways to trim IT expenses – which had risen 16% in the previous year – without sacrificing the quality of services delivered.

First off, Saint Luke’s deeply analyzed the cost of desktop computing. Through the analysis, they found that roughly 25% of desktops were deployed in patient rooms as nursing stations, and yet still had the complete standard suite of desktop applications. As a result, Gash quickly saw that she could renegotiate the hospital’s software contract, saving tens of thousands of dollars each year.

In addition, the insight rendered by their initiative indicated that most of Saint Luke’s data was housed in expensive Tier One storage, but most of it wasn’t critical and could be put in less costly Tier Two or Tier Three without impacting operations.

2.    Justify IT Innovation

While helping IT departments to eliminate unnecessary expenses, a CIO must justify their investment in technologies that fuel innovation for the company. Armed with data that provides contextual analysis (such as whether the fully burdened cost of one application is greater than one that offers comparable capabilities), CIOs can make a reasoned argument about why the millions they are spending will help the company succeed in the long run.

This strategy proved successful in the case of Gash and St. Luke’s, when the company’s CEO had been asking Gash why they were spending more than their peers. Backed with concrete data, Gash could show him that the hospital was in fact spending less on back office services than the industry standard, and was using funds to invest in innovative technologies on the clinical side, as the CEO had directed.         

By breaking down the costs in such a detailed manner, Gash provides accountability for her IT department. A CEO will be more likely to be on board with IT expenses if he or she can see exactly where the funds are going, and why. Likewise, a business unit leader will be less likely to protest IT costs assigned to them if they are able to view and track their own usage.

3.    Uncovering “A-ha” Moments
   
Traditional data spreadsheets are often woefully out-of-date and difficult to analyze, while automating traditional processes and effectively managing the business of IT helps connect the many disconnected dots to surface valuable insights.

Upon embracing this methodology, many CIOs describe having “a-ha!” moments. At these junctures, spending decisions become suddenly and fully apparent. For instance, insurance service provider First American Financial Corp. wanted to better manage their IT department in order to gain more visibility into the cost of one of their largest applications, a title-tracking application called “FAST”.

First American’s data revealed that most FAST users were using only the first year of data available on the system. First American’s CIO Larry Godec realized that they could offer a one-year-only data plan at a significantly lower price, saving the full three-year plan for a limited number of users who would be willing to pay for instant access to the full archive. In addition, data showed that First American’s ratio of labor costs to infrastructure was higher than their industry peers, leading Godec to identify strategies to lower this cost ratio. The company also found they could improve their mapping of servers to applications. With the help of this type of actionable intelligence, Godec now expects to reduce First American’s infrastructure budget by 10% within a year.
   
Conclusions


In today’s competitive tech environment, companies have more options than ever about where to direct IT dollars. By effectively managing the business of IT, forward-thinking CIOs can demonstrate exactly what they are spending money on, and what return the company is receiving from these investments. These initiatives allow an IT department to analyze, discover, and prove its real worth.    

By Chris Pick, Chief Marketing Officer for Apptio

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