Embedding a Cost Culture: Exploring Cost Levers for IT Cost Optimisation

Many businesses have come back on track slowly after the pandemic in most industries, but macroeconomic headwinds keeping all organisations cautious. Emerging technological innovations disrupting business and managing business growth with the best possible IT support keeping CIOs busy to figure out the best possible transformation paths for their organisations. Days are gone when only typical IT budget decisions at the beginning of the year & handful of IT initiatives decided, used to drive the majority of transformations. Current times see business & IT almost part of same team working in agile way to support value creation, gaining market share and innovating to be one step ahead of the competition. Cost optimisation is back in many of the CxO discussions these days, not only due to renewed pressure on improving the bottom line but also to drive innovation for the future within IT, making more funds available.

Cost optimisation or cost transformation, whichever organisation calls it, is interconnected with growth, sustainability & innovation and cannot be driven as a standalone initiative. Identifying small tactical cost savings opportunities may solve some of the immediate needs, but understanding in totality how the current cost landscape looks like covering all potential cost levers and attributing cost items in the correct category to comprehend what is driving healthy growth & value creation for the organisation, is of utmost importance to identify optimisation opportunity. In some cases, addressing these areas will require IT transformation as cost levers are linked to broader operations, practices adopted & culture, not just finding a few tactical steps to reduce costs. Hence, enterprise transformations of today consist of cost transformations as one of the pillars to drive value and achieve a longer-term sustainable cost optimisation framework for the organisation to adopt & practice.

 

Almost every organisation currently has cloud as part of their technology portfolio in some form or shape, the only difference is how deep and how mature they are in adopting cloud. So, there are no-cost optimisation discussions with CxOs without Cloud Cost Optimization or FinOps. When we think IT cost optimisation these days, possibilities are multi-faceted, from cloud cost optimisation to simplification/modernisation of application portfolio to reduction of tech debt to agile future-ready IT organisation structure involving Operating Model rejig to automation everywhere philosophy.

 

Based on my discussions with multiple industry CXOs in recent times and emerging industry developments, I have attempted to put together a simple Cost lever framework view along with potential drivers within each lever, which can be leveraged by enterprises, to quickly evaluate which of these levers & corresponding drivers are relevant for them and yet to be adopted or matured within organisation’s way of working to achieve full potential. The journey for each driver has various stages of progress. Based on the individual organisation’s maturity, the following stage path to be adopted is identifying clear initiatives to run through with measurable KPIs to track the achievement. It’s a simple six-lever cost optimisation framework view, identifying key levers critical to an organisation’s cost optimisation journey. Multiple drivers have been identified within each lever based on experience and what I saw in different industry client setups. Based on the need & relevance, each of the levers is to be deep-dived to understand the current state, assess the maturity/current achievement and make the plans to take the next logical step covering various identified drivers of cost rationalisation within that specific cost lever, to uplift the value outcome & efficiency.

Figure 1: IT Cost Lever Framework

While there is no silver bullet here to reach the end state in the cost optimisation journey in one go, it’s a continuous journey where organisations reflect periodically based on the above IT Cost Optimisation lever achievements to realign the goals & draft the roadmap in line with business & IT strategy, to move towards “nirvana” of cost culture. Possibilities are endless as there is no single future state, every organisation’s target future state will differ based on their current cost landscape, maturity and adoption of various levers and their achievement on those to progress over time.

 

Looking at increased client interests in APAC on the cost optimisation side, we as Infosys Consulting, has come-up with a holistic IT Cost Optimisation Offering to help clients in this journey with our experience from the past and matured frameworks & tool sets.