The application rationalization plans should be such that they align IT with business plans. IT spending covers a vast range of areas including business applications, networking, IT personnel, end user technology and data centers. CIOs the world over today are facing increasing pressure to achieve immediate IT cost savings in a manner which is least damaging to the long term health of the organization. In order to do this CIOs need to have a thorough understanding of all IT items in the profit and loss statement and the balance sheet.
It is said that organizations cannot cut their way to growth but can cut their way to survival. A thorough understanding of this is required especially since digital transformation helps to sustain retail business and is extremely necessary to stay competitive.
The amount of time and level of effort for such programs is often dictated by time pressures. Businesses should prioritize planning regardless of these pressures as it will drive the strategy, approach and effectiveness of the execution in the long term. Beyond the size of the budget, the CIO should also determine and establish the enterprise’s preparedness and willingness to allocate the budget necessary for undertaking this.
Assessing IT cost rationalizations measures could be done bearing the following in mind
Annual billing plans offer tremendous in terms of increasing cash flow. It therefore would make sense to eliminate, reduce or suspend items that will impact the organization immediately. This would include items such as quarterly license fees or monthly subscription fees. Options with annual payment work best.
Discretionary spending refers to costs and expenses that are non-essential whereas non-discretionary spending is one that is required to be honored by a budget, contract or commitment. Discretionary spending such as for a new project, additional capability or services is often an easier place to start with. However even certain non-discretionary expenses such as certain infrastructure and operations can be cut by reducing usage or service levels. The spotlight therefore would rest on digital transformation return on investment (ROI) which may not be evident in the short term.
OPEX( Expenses that an organization incurs for its day to day functioning) has the maximum impact on the finances of a company. Whereas CAPEX (Expenses incurred when the organization acquires assets which will be beneficial beyond the current financial year such as equipment and buildings) and can be considered for cost reduction too.
The focus should rest on costs that can be reduced or eliminated completely. Some costs tend to be categorized as frozen and remain under the surface for a certain period only to resurface at a later point of time. Such costs needed to be avoided. Memberships and subscriptions to organizations/clubs related to the business of the organization or reading material, are good examples here especially since they can be eliminated completely or reinstated down the road if the necessity arises.
The fact that cost rationalization measures can be hard and confronting, is reason enough for several organizations to skim through the surface and not delve deep enough for complete assessment. As a result of this, there is a possibility that this exercise needs to be revisited again and again. To ensure a thorough job in application portfolio rationalization, it would help to bear in mind this sequence of steps
Here a questionnaire to gather information about data elements across business, technology strategic fit functionality and cost dimensions can be the starting point.
Each of the parameters collected during the previous stage is assigned a weight depending on its contribution towards the technical health and business value of the organization. This would determine further course of action for each of the items listed on the survey.
A rationalization map is then created based on the above steps which will help to identify opportunities for application decommissioning, application consolidation, technology upgrade and functional enrichment.
Based on the available budget, CIO’s need to adopt the appropriate cost rationalizing measures keeping the business continuity plan in mind. Digital transformation of various processes is a good way to cut costs in the long term. Some of the methods could be
It involves replacing physical hardware with their virtual counterparts. This maximizes the use of server resources.
Here service providers deliver networking, storage, computing, telecommunications and other IT functions. Doing so eliminates the need for extra space during high demand times as well as employees spending time on the maintenance of the same.
Cloud computing is a popular method for companies to reduce IT infrastructure costs. Today using the hybrid cloud model, workload can be distributed between public and private environments.
Standardization would ensure consistency across different hardware and software applications. It also helps to maintain compatibility and serves to put everyone on the same platform.
The digital assurance market is fast gaining prominence due to digital transformation that is helping retailers bounce back post COVID.
Digital solutions for retail, implemented in accordance with digital maturity models are transforming the retail market in several ways.
When adopting digital technologies, Digital assurance ensures that the digital strategies deliver the expected business outcomes and experiences for customers.
When adopting new age IT infrastructure for regulatory compliance the cost and risk should be low while productivity of enterprise applications be high.
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