While economic pressures have put the spotlight on short-term IT cost savings, according to a new report by Europe’s leading IT research and advisory organization, Butler Group, of even greater significance is the longer-term emphasis on the strategic management of IT costs, as well as getting value from existing and new IT investments. Titled “Managing Costs in IT Report – Maximizing the Value of IT Assets and Budgets,” the report identifies that for IT management there is a continual balancing act between cost, quality, and risk. Cutting costs too deeply could impact service quality or open up the organization to unacceptable risks. It should also be remembered that customer satisfaction remains an important business imperative. An area that has long been undervalued within the IT function is risk management, and this too, in Butler Group’s view, should start to move higher up the agenda.

Butler Group recommends the deployment of IT governance which should be used in conjunction with the corporate governance initiative and employed not just for compliance and management reasons, but also for providing a framework for measuring and controlling IT costs.

“It is not a question of how much is invested in computer systems but the effectiveness of the spending. Most organizations have very little visibility into IT performance,” says Mark Blowers, Enterprise Architectures Practice Director and co-author of the study in a press release. “This needs to change – due in no small part to the growing compliance and regulatory pressures, which entail IT management having the wherewithal to prove the department is being run effectively and offering value. To provide this transparency and accountability many enterprises are turning to governance as an important mechanism for controlling the organization.

“The effectiveness of IT investments is a very significant factor in the ability of IT to provide value. Organizations must establish a clear IT service model against which costs can be allocated and performance monitored, including establishing a baseline for both these attributes. Most importantly, this measurement should then be linked to business activity, which enables rational decisions on IT cost management to be taken and understood in the context of business operations and objectives.” 

IT projects should not be viewed in isolation but looked at holistically as one element for improving the effectiveness of the whole organization. What has been found to work well is incorporating IT projects as part of organization-wide initiatives, where the IT element is an enabler rather than the main driver. A good Portfolio Management solution helps an organization select the right blend and balance of IT investment, as it is critical that those projects are selected that make the best use of both limited financial and human resources, and which provide the maximum value. Doing the right things is just as important as doing things right.

Blowers concludes, “Both energy and operational efficiency are becoming more significant as organizations seek to lower power consumption and minimize the impact upon the environment. Migrating IT hardware from older, less-powerful infrastructure onto a modern, energy-efficient, high-performance resource pool can help to reduce operational costs.”

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