As IT budgets get crunched for FY2023, many CIOs are facing the reality of less headcount, fewer investment opportunities, and the dreaded “do more with less” cliche. Smart CIOs must find creative ways to maximize dollars while maintaining IT throughput. Below are several areas to examine for cost savings as we transition into the new year.
1. Software Portfolio Rationalization
Software sprawl is a major source of waste in today’s enterprise. Mid and large-sized enterprises typically have hundreds of SaaS application subscriptions; more than half of which often go unused by employees. So why pay millions of dollars for something you don’t use?
The answer is that few people are proficient in understanding software capabilities across the enterprise.
Software portfolio management is essentially the means by which the entire software footprint is analyzed holistically. Rather than examining applications one-by-one, a list or “portfolio” of applications is built and then grouped by function, departmental use, vendor and so on. From there, strategic clues can be derived to tease out actionable insights such as where there’s redundancy, how often applications are used, and degree of customization. Once redundant or overlapping solutions are identified, they can be earmarked for retirement.
Digging for the internal software install base can be done manually by querying the purchase order and expense systems, but this is a fairly tedious process. A better approach is to implement a simple software asset management (SAM) solution to help with software discovery, categorization, usage, and cost measurements.
A final word to the wise: having implemented several software asset management solutions, I can tell you first hand that discovery and analysis are the easy part. The hard part is making the executive decisions to sunset redundant or deprecated systems. End-users will find creative justifications for their favorite applications; some of which are valid while others are purely subjective. Be prepared to make hard decisions here.
2. Software Platform Optimization
A close relative to software portfolio rationalization is platform optimization. In a nutshell, this means making the most use out of the software platforms you plan to keep.
I routinely observe enterprises that own expensive platform solutions such as Oracle ERP, Workday HCM, ServiceNow, and Office365. Yet I consistently see only a fraction of these behemoth platform capabilities being used.
Getting more out of your heavy-hitter platforms first requires understanding their full suite of capabilities. Enumerating what a software platform can do versus what it does today is the first step in analyzing what it can potentially cannibalize from the crowded landscape of software sprawl. Sandbox environments of the platform should light off potential modules of interest for evaluation. If and when an incumbent platform has the core set of capabilities needed, that’s another chunk of redundant software that can hit the big recycle bin in the sky.
3. Vendor Consolidation
Yet another benefit of software portfolio rationalization and software platform optimization is vendor consolidation. However, not all vendors are product vendors, and the notion of streamlining suppliers applies to services as well.
Similar to how we examine software products by vendor, function, etc, the same can be done with vendors. Common examples here include merging web hosting firms, collapsing creative agencies, and consolidating PR firms.
Managing fewer vendors means less overhead for your staff, but there’s real dollars to be saved here. In very large organizations, it’s not uncommon to see multiple instances of the same product or varying offerings from the same vendor. For example, a parent company may use Okta with all the enterprise bells and whistles, while a subsidiary uses a striped down version of Okta or another product entirely. Strategically managing vendor relationships across divisions and operating companies can lead to fewer vendors and even better per-seat prices when consolidating and thus operating at larger scale.
4. Embracing Remote Workers
There are some managers who believe there’s no substitute for in-person work. In fields such such as dentistry, manufacturing, or auto repair that may very well be the case. But for knowledge worker positions, allow me to propose a few data points for consideration:
- Despite the doom-and-gloom economy of 2023, there’s still far more demand for skilled workers than supply
- Remote workers are cheaper than their in-office counterparts who require office real estate, cubicles, and oftentimes expectations of free meals.
- Your talent acquisition pool increases significantly when you’re not physically bound to an anchor city such as Austin, San Francisco, or New York City.
- Without commutes, office noise, or conference room conflicts, employees are demonstrably more productive when working remotely.
Managing remote workers requires tweaks to traditional management methodologies. Simply “showing up” isn’t the litmus test for productivity. Instead, employees should be held accountable to agreed-upon outcomes. Moreover, your information technology baseline must be sound in order to ensure adequate connectivity and security.
5. Shifting Operational Work to Third Parties
Traditionally, shifting work to third parties meant outsourcing. And while outsourcing (either onshore or off) is still an excellent cost savings mechanism in certain cases, there’s a bit more to unpack here.
First, there’s the question of what to shift. I’m a fan of Geoffrey Moore’s core vs context paradigm, whereby a company should focus on their value stream, and generally shift commoditized things elsewhere. However, the real-world is of course more nuanced than that. A traditionally “boring” service such as the IT help desk may be contextual from a product point of view, but is mission-critical and may need to remain in-house. Again, this is where key management decisions must be made.
The next question is where the burden will be shifted. Historically we looked at third-party services firms, but in 2023, we’re no longer working with humans exclusively. Robotic process automation (RPA), chatbots, and other artificial intelligence-based automation solutions have opened up a whole new world of efficiency gains.
Although armies of people performing mundane tasks can be replaced by robots, our new artificially intelligent partners need care and feeding of their own. Evaluating automation opportunities, migration, and bot supervision require skilled consultants as well as in-house staff to keep the lights on.