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CIO_Question.pngThis blog is the third in a series to provide insights about IT Economics and discuss results from a survey with more than 70 CIOs and IT manager. Part 3 is dedicated to key best practice measures with the highest potential to reduce TCO. Part 2 was focused on the expected economic impact, CIOs rated on selected technology innovation (link to blog).

The challenge to manage IT cost is not a simple task and as old as the IT industry. Why? Large enterprises and a growing number of midsize or even smaller companies typically need to deal with 6 facts:

1. Widespread Operations

2. Complex Business Processes

3. Heterogeneous Solutions

4. Mixed Technologies

5. Many Supplier

6. IT-Business Management Gap

CIOs and IT manager ask: How to drive down IT cost? Sure, there are many answers to this question. I see 4 key directions to look at: 1. Complexity Reduction, 2. Execution Excellence (i.e. IT processes optimization), 3. Sourcing Optimization and 4. Business-IT Alignment. In the survey we covered 25 best practices measures to reduce TCO.

Survey Question: How do you rate the potential to reduce TCO for the following measures? (low / medium / high)

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Survey Results: Here are the Top 10 measures to reduce TCO according to the estimated cost reduction potential.

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My key take-aways: Business-IT alignment or more precisely, demand management (Rank 1: Joint  Business-IT planning, Rank 3: Joint IT-Business Project Portfolio Management), has climbed to the top of the ranking.

While “Reduction of number or applications” was on the “podium” in 2011, this year barely made it into the top 10. Could this be a positive signal, meaning that the participating companies already consolidated the application landscape to a large extent? I still see application portfolio management as a pivotal discipline to manage IT cost. After all, it is a key lever to control complexity.

Accelerated & Lean Implementations and Upgrades moved up the lader, from rank 24 (in relation to implementations) and from rank 7 (in relation to upgrades). Here I want to add that in 2011 we asked two questions, one with regards to implementation and one with regards to upgrades. This year we decided to merge it into one question. Based on the unexpected result I ask myself if it was a good decision and would probably separate the questions again. My advice for accelerated and lean implementation: The fastest way to adopt innovation: SAP rapid-deployment solutions.  In one package, you get everything you need to be up and running quickly – including preconfigured software and implementation services – in just weeks. With a defined scope and predictable costs, there are no surprises.

System Landscape Consolidation  is another measure worth mentioning as it moved up from rank 11 to rank 6. Even if there might be (good) historical reason for any given system landscape – complexity is a major pain point and a driver for higher IT cost. Maybe even more important, it could become a barrier to adopt innovation to increase business value. I recommend you to check this blog/ video from SAPHIRE: Innovation starts with optimizing the landscape

What is the perspective on IT Economics in your business? Take part in the survey and find out, free of charge. It is now available globally, here: IT Economics Survey @ SAP Value Management Center

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Your View matters: What is your experience with TCO reduction? Share your feedback and thoughts!

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