Reducing the Cost to Serve - Internal IT Admin Services

About this research note: Operate & Optimize notes provide Reducing Cost-to-Serve: recommendations for effective and efficient IT practices that help Internal IT Admin improve the performance or reduce the cost of technologies already Services deployed in the enterprise. Publish Date: April 8, 2009
Focusing cost-reduction efforts on internal IT administration services provides quick cost savings. However, it is important to supplement short-term tactics with mid and long-term follow- ups. The techniques provided in this note, as well as the potential pitfalls and case studies, allow IT decision makers to align the need to reduce costs with the need to meet business requirements. © 1998-2009 Info-Tech Research Group www.infotech.com
Executive Summary This research note applies the Cost-to-Serve cost management approach to identify opportunities for controlling expenses in the internal IT administration services area. Coverage includes: » Guidance on where this service area is a strong cost-cutting candidate for the organization. » Descriptions of specific cost-reduction measures that can be achieved according to varying time frames.
» Case studies that provide real-life insight into experiences with these cost-reduction techniques. By understanding the cost to deliver internal IT administration services, IT can determine a better cost management approach that reduces costs while protecting the overarching strategy of the enterprise.
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Introducing Cost-to-Serve The Cost-to-Serve method examines the relative cost to deliver specific IT services, such as servers and storage services, end-user support services, and application maintenance services. Its ultimate goal is to directly map and forecast the impact that changes in spending on IT services will have on the ability to achieve business strategy.
When activities have been categorized into services, it's much easier to decide what spending changes to make. Spending changes that will negatively affect business strategy are avoided, and those that will positively impact business strategy are prioritized and pursued.
Service Description Internal IT administration services include the administrative A Practical Methodology functions required to operate the IT organization, including finance, human resources, procurement, strategy and governance, and For step-by-step guidance on facilities. IT decision makers tend to look to internal IT leveraging the Cost-to-Serve administration services when they need to make quick cost method to reduce costs, refer to reductions. Despite the high pain associated with some elements the ITA Premium research note, in this service area, it offers high returns when cost-reduction "Methodology: Reducing IT Cost-timelines are tight. to-Serve."
When to Reduce a Service Consider the following statements to investigate whether exploring internal IT administration services presents a cost-cutting opportunity.
» The organization needs to reach cost-reduction targets within a short time frame. » Staff productivity levels are not formally measured and sub-optimal productivity is suspected. » Contract workers represent a significant percentage of employees.
» There are no formal policies and procedures in place for managing travel and training expenditure. » The IT department has not fully streamlined administrative processes. » Management of IT operations is distributed across multiple locations.
» Projects are not prioritized based on cost-reduction potential.
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Enterprises with these characteristics should begin to examine internal IT administration services for possible cost savings.
Cost Reduction Targets A recent Info-Tech survey of IT decision makers found that 62% focus on staffing costs to manage ongoing expenses and 76% cite discretionary spending (travel, training, and supplies) as an area of focus for everyday cost management. For those organizations under pressure to reach specific cost-reduction targets, some commonly cited methods to reduce costs in internal IT administration services are:
» Travel expense management (71%). » Tra... [download for more]