Using transformational analytics to combat cost inflation
Due to business dynamics and continuous demands for lower costs and increasing agility, most IT systems today have achieved a level of sophistication and complexity that now burden the business. Rapid change cycles driven by exponential growth in technological innovations and shifting market expectations have led to escalating operational costs and system instability.
As digital transformation efforts expand, the costly disconnect between business and IT is gradually increasing. At the beginning of any IT project, requirements are set by business stakeholders. IT then translates business requirements into technical requirements based on a static view of the business’ needs.
However, in truth, business requirements are always changing. So, IT must continuously make systemic changes that stretch the implementation to match the reality of business dynamics. This causes rapid generation of complexity, implementation obsolescence and cost inflation.
Identify the Hidden Factors that Inflate Operational Costs
To create more resilient businesses and ultimately more value, it is necessary to build and maintain operational environments that deliver the best performance with the best economy. However, long-term cost avoidance can only be achieved with architectures that enable businesses to agilely adapt to constantly changing requirements.
In this capacity, advanced predictive analytics and mathematical emulation techniques can help guide and test strategic transformation decisions throughout project execution to ensure an optimal outcome.
A new class of analytics, labeled ‘transformational analytics’ by Enterprise Management Associates (EMA), allow organization to model an entire business ecosystem to diagnosis problems and find the best way to remediate the dynamic factors that lead to cost inflation.
EMA defines transformational analytics as having the following core components:
· It addresses IT, business infrastructure, and business behaviors and processes with equal depth, balance, and resilience
· It leverages predictive mathematical emulations to recreate entire business IT ecosystems
· It evolves with changing factors to anticipate otherwise unknown risks
· It provides ongoing, active guidance (it is proscriptive), as well as insights
· It can dynamically assimilate data from multiple sources to stay current with business and IT behaviors
Using transformational analytics, it is easy to evaluate an unlimited number of cost rationalization or cost avoidance options to realistically understand the associated benefits, complexity and execution costs of any proposed solution. Further, once a path has been chosen, the capabilities can help guide the project execution to ensure the best possible outcome.
Use Cost Efficiency as a Competitive Advantage
A great opportunity exists for businesses that are able to significantly raise their cost efficiency—by gaining visibility into the dynamically complex factors that drive cost base and exposing more strategic and sustainable options for long-term cost management.
Stripping out cost is undoubtedly hard work, fraught with many challenges. And while those that lack transparency into the root causes of cost inefficiencies may well still achieve growth, it may be unprofitable growth. Businesses that approach cost management as a Board-level strategic concern and use the most advanced decision support tools will create space within which to grow their profit margins and secure a real competitive advantage.