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GartnerResearch
12RulesofITCost
Management
ByRobertNaegle,ChrisGanly,BryanHayes
1December2021
12RulesofITCostManagement
Refreshed1December2021,Published1July2020-IDG00730117-9minread FOUNDATIONALThisresearchisreviewedperiodicallyforaccuracy.
ByAnalyst(s):RobertNaegle,ChrisGanly,BryanHayes
Initiatives:ITCostOptimization,Finance,RiskandValue
CIOschallengedwithbettermanagingITcosts—costcutting,assetoptimizationandinvestingindeliverablesthatmattermosttothebusinesses’missionandobjectives—shouldapplythese12rulestotheirstrategiccostoptimizationefforts.
AdditionalPerspectives
■SummaryTranslation:12RulesofITCostManagement
(11August2020)
Overview
KeyChallenges
■ManyITorganizationslackaformalprocessandacommonlanguageforcontinuouslyrefiningcosts,optimizingITspendorprogrammaticallyinvestingtocreatebusinessvalue.
■Costcuttingisareactiveexerciseandfailstoconsidertherealimpacttobusinessoutcomes,objectivesandrisk.
■CIOsdonotactivelydrivetheirteamstomanageITspendwithaclearstrategicalignmenttobusinessgoalsandobjectives.
Recommendations
CIOsthatdesiremorestrategicapproachestoITcostoptimizationshould:
■Elevatetheculturalfocusandpriorityofstrategiccostmanagementbyimplementingaprogrammaticandproactivecostmanagementapproach.
■DemonstrateITstewardshipofcorporatefundsbycontinuallyharvestingundervaluedinvestmentstorecoverandreinvestfunds.
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■ImproveIT’scapacityforgreaterbusinessimpactbyimprovingtheefficiencyandproductivityofcurrentservicesandassets.
■MovebeyondcostcuttingandoptimizationbyinvestingITresourcesinneworincrementalbusiness-valuedopportunities.
StrategicPlanningAssumption
Through2025,CIOswhoimplementthese12ruleswillbe60%moresuccessfulinelevatingtheirstrategiccontributiontotheirorganizations’missionandimproveITspendingefficiencybyover45%.
Introduction
ForCIOsstrivingtobettermanageITcosts,thefollowing12rulesarecriticaltoasuccessfulcostmanagementprogram.
Analysis
Leadingorganizationsbenefitfromaproactiveandpersistentcostmanagementdiscipline,aningrainedculturethatregularlylooksforwaystorecovercurrentspendonprojectsandservicesthatareunderperformingorinwhichthereisoverinvestment.Costoptimizationisoftenaeuphemismforcostcuttingorspendreductionsthataredrivenbydemandstocutcostsinthewakeofabusinessneedoraneconomic-drivenrequirement.Costmanagementsuggestsanongoingdisciplineofanalysis,review,recovery,productivityimprovementsandreinvestment.
CIOsshouldusetheserulesasastartingpointforframingandguidingtheexecutionoftheircostmanagementstrategies.Foreachoftheserulesconsider:
■Howdoesthisruleapplytoourorganization?
■Whereandhowshouldwecustomizethisruleforourorganization?
■Areweactioningthisruleinoureffortstomanagespendanddelivervaluetothebusiness?Ifso,how?
■Whatshouldwedodifferentlytosavemoneyanddrivegreaterassetefficiency?
■Whencanweputthisruleintoactionincostmanagementefforts?
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Eachruleissupportedwithasummaryoftheimplications,abrieflistofrecommendationsandlinkstoadditionalreadingthatwillprovidegreaterdetailinsupportofthedefinedrule.Wesuggestthatyoureadtherelatedresearchtogainadeeperunderstandingoftheserecommendations,andreachouttotheappropriateanalyststodiscussthespecificimplementationopportunitiesandchallenges(seeTable1).
Table1:RulesforStrategicCostCutting
AsyouworktoapplytheserulestoyouruniquesituationpleasebookaninquirycallwithaGartneranalysttohelpyouapplyandadapttheserulesortoreviewandprovidefeedbackonyouradaptations.
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AcronymKeyandGlossaryTerms
TCO
Totalcostofownership—theinclusionofallIT-relatedcostsofprovidingsolutions/services/technologies.
CostModel
Representationorvisualizationofcosts,structuredtoansweraudience-specificquestionsaboutcost(see“CIOsMustMasterFourViewsofSpendtoManageITFinances”).
RecommendedbytheAuthors
SomedocumentsmaynotbeavailableaspartofyourcurrentGartnersubscription.SmarterSpending:InvestinBusinessOutcomes
StrategicExecutivesManageCostsAcrosstheEnterprise
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Actionable,objectiveinsight
PositionyourITorganizationforsuccess.Explorethese
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