How to optimize costs for your digital business initiatives?

Organizations today are continuously investing in digital business initiatives, and their IT groups are expected to support these new initiatives using existing budgets.

That is why CIOs need a cost optimization strategy that facilitates revenue-generation and new digital opportunities.

• Let’s take a look at the challenges CIOs face while planning cost optimization strategy:
• IT organizations face the challenge of providing business capabilities like cloud, digital, mobile and analytics with a minimum number of applications. This results in blanket cost-cut requests rather than targeting sustainable actions.
• Several application services contracts are billed on time and materials. This results in the organization taking all the productivity and financial risk associated with the provider's application delivery team.
• Application service contracts normally include inflation rate increases, resulting in year-over- year escalations in service costs. However, they do not include productivity and automation savings that can prove significant for cost optimization.

In this post, I will discuss the 4 ways with which you can successfully optimize costs:

1.   Reduce

In this phase, you must prioritize your expenditure. While prioritizing, you must focus on long-term initiatives over short-term cash savings. Business leaders and CIOs must take into consideration the degree of organizational and technical risk during planning their expenditure.

2.   Optimize

In this phase, your must focus on eliminating excess waste while improving the efficiency of current systems, delivery rate, quality, and utilization. You must determine suitable metrics to measure performance and indicate the efficiency level of IT initiatives across all areas in your organization.

3.   Rationalize

In this phase, you must seek business relevance and agility. You must focus on your significant business goals and ensure that IT initiatives are aligned with business objectives and priorities. Your IT performance metrics should be closely tied to your business metrics. This will ensure that their alignment is measured appropriately.

4.   Transform

This phase teaches you to that if want to optimize cost, you must first make the necessary investments. As economic conditions of companies are improving, they can now focus their cost optimization efforts on implementing long-term business and IT process improvements. This will enable them to innovate and reposition their business and gain a competitive edge in the market.

CIOs can also conduct application portfolio analysis, and create a cost optimization evaluation matrix to prioritize the cost reduction opportunities based on ROI or other business objectives. Also, they can create a core cost optimization team that will monitor the market for new service delivery options and emerging business opportunities.

In the digital business economy, cost optimization is about using a mix of IT and business cost optimization techniques to boost business performance while preparing for the future that digital disruption constantly reinvents. Utilizing a structured approach will provide you with opportunities for cost optimization and your digital initiative will yield a long-term value.