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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

©2021Gartner,Inc.and/oritsaffiliates.Allrightsreserved.GartnerisaregisteredtrademarkofGartner,Inc.anditsaffiliates.ThispublicationmaynotbereproducedordistributedinanyformwithoutGartner'spriorwrittenpermission.ItconsistsoftheopinionsofGartner'sresearchorganization,whichshouldnotbeconstruedasstatementsoffact.Whiletheinformationcontainedinthispublicationhasbeenobtainedfromsourcesbelievedtobereliable,Gartnerdisclaimsallwarrantiesastotheaccuracy,completenessoradequacyofsuchinformation.AlthoughGartnerresearchmayaddresslegalandfinancialissues,Gartnerdoesnotprovidelegalorinvestmentadviceanditsresearchshouldnotbeconstruedorusedassuch.Youraccessanduseofthispublicationaregovernedby

Gartner’sUsagePolicy

.Gartnerpridesitselfonitsreputationforindependenceandobjectivity.Itsresearchisproducedindependentlybyitsresearchorganizationwithoutinputorinfluencefromanythirdparty.Forfurtherinformation,see"

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."

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Actionable,objectiveinsight

PositionyourITorganizationforsuccess.Explorethese

additionalcomplimentaryresourcesandtoolsforCIOs:

ResourceCenter

CIOs’RoleinDigital

Transformation

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addresstheirtopchallenges.

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GartnerDigital

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