January 28, 2010 - CIOs traditionally have focused on a supply-side approach to IT cost control, but as IT spending grows, CIOs of global businesses must focus on managing demand for IT resources in order to reduce costs and improve operations, according to Compass Management Consulting data and study.

Supply-side cost control increases the efficiency of service delivery over time. However, rapidly increasing demand for resources and higher service levels offset supply-side savings due to overall cost increases. CIOs must define strategies and work with business leaders to raise awareness of the cost implications of unrestrained demand.

"Demand management is capturing the attention of IT managers and C-Level executives because it is THE most effective way to rein in IT spending for most companies," says Scott Feuless, a Compass principal consultant. “Demand for new resources is huge, and without actively managing that demand, it will far outstrip cost reductions that IT can achieve through increased efficiency."

Approaches to better manage demand include storage strategies on data management, chargeback programs that link IT usage to business requirements, server virtualization initiatives and incentives for service providers to reduce utilization.

"Virtualization has taken off like a rocket precisely because it is a demand management tool – it allows you to meet business needs with existing resources rather than going to new procurement," says Feuless. "What’s better than a server (or a disk drive, or a network switch) that’s cheap to purchase and run?  One you don’t have to buy at all."

While these approaches are not radically new, Feuless says top-performing organizations are putting demand management controls in place to optimize cost efficiency.

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