Demanding IT Cost Controls
Rising costs within the IT organization is an issue facing most every Chief Financial Officer in the country. Expenses continue to rise and the absence of clarity has many executives stumped in methods to get expenses under control. This competitive market pressures for innovation and economic pressures to reduce costs continues to place high demands on companies IT organizations. The growth economy that supported innovation and infrastructure projects in the past is disappearing, and narrowing margins shifts Finance’s focus inwardly to drive cost reductions and improve profitability. These complexities in today’s information technology organization requires that strategic cost improvement initiatives move beyond financial transparency exercises of service catalogs and cost modeling to the proactive identification of improvement opportunities in both IT operational and project spending.
The problem may not be as much about the IT organization as it is the corporate culture and system it operates. The IT organization is simply responding to the demands and meeting the expectations of the established system, rewarded on timely delivery of projects, system up-time, and other non-financial measures. Trivial issues such as financial performance and cost reduction are not high priorities for IT management as there is little accountability built in to performance management to reduce unit costs for services provided to the organization. From our Fortune 100 experience, Armada Consulting is encouraging Finance to move beyond transparency and build accountability and control into the Finance functions for spending decisions.
Armada Consulting recognizes that every organization is unique and must adapt within their environment, and has developed a framework for IT Cost Management that enables a company to transform the way IT costs are controlled. With IT Cost Transformation, we take finance beyond the transparency of understanding:
- operation vs innovation spending
- technology contribution to products and customers
- activity cost per unit
- resource capacity
- productivity measures
- cost to serve
- key profit drivers
By integrating that information into a framework that has an impact on IT costs. Finance cannot assume to solve today’s cost management problems with yesterday’s expense management methods. What is needed is a comprehensive approach that builds efficiencies into Finance, focuses on unit costs and consumption, and promotes accountability in IT spending. Move beyond transparency and puts strategy back into finance, contact Armada about the first step to IT Cost Transformation.