How CIOs Can Transform IT Spend

scale down. A word many CEOs still hear, even in today’s world of strategies focused on growth and transformation. However, when focusing on efficiency and optimization, “reduce” can be a powerful tool in the CIO conversion arsenal. The Reduction is one of five “R’s” I discussed earlier in CIOs: The New Corporate Rock Stars. It focuses on the need to reduce waste and inefficiencies in operational and engineering processes and the constant quest to produce “more for less” while improving spending, not just cutting it.

This is fundamental – and the reason CIOs should be energized by the opportunity to reduce – because it’s actually about spending better and smarter, while simultaneously increasing value from existing investment and driving innovation and business transformation. It requires creativity, agility – and fresh thinking.

But how will they do this? By reimagining costs (not reducing them). As a matter of principle, CIOs should consider the efficiencies that can be found in cloud operating models first and through other of the five R – workforce reshaping. These two steps are now tabular stakes in a world outside of COVID-19, as they not only reduce costs but also help the organization meet the full potential of digital transformation.

As discussed in the Accenture report – The Power of Information Technology in an Uncertain World – CIO’s funding agenda now includes a long list of priorities: investing in the digital experience of customers, workers and other stakeholders; investing in remote workforce tools; strengthening security infrastructures; In addition to the two basic moves – cloud first and refinish – mentioned above. When surveying these expenditures, CIOs should adjust spending to make room for reinvestment in the IT capabilities that drive long-term growth, and rotate the IT cost base to free up money.

We call this Zero Shift (ZBT) – a value-based alternative to reducing the cost of traditional IT. As CIOs look to work to adopt ZBT to fantastically reduce costs, they should focus on three key steps.

First, they must develop a new spending profile for the company, to look for one the correct IT spends, not minimum. The key is not to rely on historical spending patterns. IT managers must weigh the technology investments needed to compete in volatile markets. Spending should be based on the disruptive value of the technology, business priorities, growth platform, and current and future business and IT needs. CIOs can also benefit from the incremental change efficiencies that occur when using AI in business and intelligent automation in IT. In addition to reinventing how work gets done, these technologies can create a cash-generating, self-financing approach to reinvestment.

Second, CIOs must create a variable cost structure, replacing standards with value levers to enable more flexibility when savings are realized in the future. It’s important to know which jacks to focus on to get started, but flexibility is crucial because jacks will naturally develop over time. By applying value levers in areas such as sourcing, applications, and infrastructure spending, a single global power provider has outpaced standards and identified 25% of potential savings to drive toward transforming the entire IT organization, making it faster, more flexible and more proactively innovative.

Third, CIOs should increase value transparency as quickly as possible, reviewing all categories of IT spending and viewing them as a whole, through a service lens. This means going beyond creating cost efficiencies and optimizing IT spending for the value delivered. CIOs really need to look for opportunities to achieve financial savings with “hassle-free” reductions in consumption rates that make sense based on the needs of the business. This is particularly the case when considering the need to improve live cloud workloads, something that should go hand in hand with increased use of cloud-based services. The CIO of a consumer goods company with a history of running at an average standard was skeptical that more savings would be possible. However, given the value levers, the company identified 12% of nondiscretionary spending that could be repurposed as discretionary. This helped fund innovative technology offerings to support the business, and stimulated new growth through reinvestment.

Implementing more efficient cloud strategies first, realizing savings through workforce rehabilitation, and then following ZBT in reimagining IT spending, allows today’s CIOs to “downgrade” without reducing business and technology transformation outcomes. These considerations are part of the urgent demand for CIOs as they are accustomed to their new “rock star” roles in companies.

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