Standardize IT processes and operations - CIOs can bring in service management best practices; apply six sigma and lean principles to streamline the process of maintenance and support. Typically, organizations may achieve 5 to 10% savings in operational costs due to standardization of processes through improved productivity. These savings vary depending on the nature of the operations.
Automate Manual IT tasks - CIOs need to automate routine activities to reduce manual effort and achieve higher process maturity in operations. Some activities that are natural candidates for automation include reporting, weekly and daily application check, alert monitoring, problem identification etc. We have seen organizations achieve 10 to 20 percent savings due to automation of processes. Companies must investigate the cost benefits of implementing Run Book Automation (RBA) solutions for operations.
RBA tools have matured over the past couple of years and have helped organizations realize substantial savings on operational costs. A task based automation approach could lead to benefits of up to 8 to 10% within the first three months. We have seen this consistently work well across 40 varied IT environments with varying degrees of maturity.
Process control - There is a need to evaluate the change and release management processes of applications, infrastructure, etc. CIOs need to implement stringent change control mechanisms to curb unauthorized change, which lead to unavailability of business applications and productivity loss. IT organizations could save ˜ 5 to 8% in unplanned costs and better compliance to federal regulations and de-risk the IT operations by achieving process control.
Long Term -- Business Innovation
Assess alternate delivery models - CIOs need to consider alternate delivery models to get faster cost benefits. Some of the delivery models that can be successfully deployed include:
• Transaction-based pricing models for support and maintenance.
• Pay-as-you-go models.
• Catalog-based pricing models.
• Unit of Work (UoW)-based pricing models have delivered an immediate cost benefit of up to 15 percent reduction in OPEX to customers who moved from traditional time and materials (T&M) and fixed price (FP) model.
• Managed Application Operations Models.
• Cloud computing: Source e-mail and office productivity applications through the cloud.
The above strategies have been used well as transformation levers in banking and healthcare verticals. Our experience suggests that significant upfront benefits can be achieved by choosing strategies that can be implemented without significant change management to begin with. For example, a leading investment bank saw a 15 to 20 percent reduction in TCO due to consolidation of service desk and movement from a T&M to a UoW model. The second phase is a strategic initiative that could involve multiple levers like automation, consolidation of technology and standardization of processes.
In the case of healthcare customers, rationalization of technology and software licenses lead to a reduction of ˜ 5 percent TCO to the IT organization. Platform consolidation and automation can lead to a further savings of more than 10 percent in the next six months.
While the above mentioned strategies are capable of achieving significant cost savings in the short and medium term, it is important to have frameworks in place to sustain these activities. Many organizations tend to look for immediate returns through IT transformation -- however, most are unaware of the level of effort and investment that is required to sustain the rewards. As is evident from Figure 1, most of the strategies mentioned above will plateau after sometime.
A key point to remember is to document the business value of the strategies mentioned above. While some strategies may bring immediate cost savings, others may not -- but they will be crucial nevertheless. For example, building a framework around Configuration Management Database (CMDB) may require a significant one time effort -- but the rewards are visible when a platform migration is underway.
In conclusion, it is important that in these trying economic conditions CIOs utilize all available strategies and avenues to deliver more with less. They must use this opportunity to build a strong process and technology foundation to prepare their organization for the next upturn.
About the authors
Rama Murthy Prabhala is a Delivery Manager with Infosys Technologies Limited. He specializes in program management of large Application and Infrastructure programs with focus on Banking and Capital markets and Manufacturing sectors.
Rahul M. Joshi is a Principal Consultant with Infosys Technologies. He specializes in IT strategy and provides consulting in the area of complex IT transformation programs. He is responsible for IT Service Strategy, Tools, Solutions and Reuse programs in Infrastructure Management Services.