Reduction of budget and demand to do more with less has off late become the job description of a CIO than just remaining an annual phenomenon that used to be triggered by the budget. Almost every established corporates today look cost reduction as their top five key focus area every year. The cost reduction has started coming with new names like automation, rationalization, outsourcing, productivity improvement, and many more such definite nomenclature but the essence remains the same ‘Do more with less.’
As an established expert in managing programs for large corporates, Team ScrumStart have been advising many companies on their cost reduction strategies and have learned many lessons of what to do and what must not be done.
- Look Beyond the Normal: Every CIO keeps cutting workforce and renegotiating the deals to face the same situation in a few months. The typical ways of cost reduction may give any organization its due for a year or a couple more, but not perpetually. Instead, extending such strategies as the only way to cut cost, CIOs need to look beyond and reinvent their roles from a support role to a business function. The three most effective of these strategies can be:
- Automation: Digital transformation is one of the most effective methods of reducing cost and improving the experience of employees and customers. Cloud migration, legacy modernization, using the power of AI and other new age technologies hold immense potential for any business. In the coming time, automation may no more remain an option but a necessity for survival for any company. The challenge in such a transformation is not technology, but the mindset of employees of any organization that the leadership must plan to soften and embrace any changes coming to improve their business.
- Setting your Offshore captives: Cost arbitrage by setting offshore captives in geographies like India has come up as a big quick win for CIOs and every CXO to cut their cost. The DIY (Do it yourself) model has proven to be the most cost-effective of every method along with a vendor driven Virtual captive that runs on a cost-plus model. A saving of 20% to 40% can be achieved on workforce cost using this model and more and more companies globally are doing this. Check out our latest whitepaper on 'How to Setup a Virtual Captive'
- Become a consultant to business: CIOs should no more be everyday order takers, but act as consultants and run their IT team as a business. Most of the companies have started using their IT as a business to ensure better accountability; however, this does not guarantee a consultative approach from the technology team. CIOs need to ensure that they create their organizations professionally that sells them projects and participates in the business SLAs like any other business leader to earn their respect.
- Accelerate Governance
Good governance has done wonders not only with companies but even countries. Most of the excellent effort gets wasted due to small gaps that usually go undetected. Setting the right rules and ensuring that they are followed without exception and regularly reviewing the validity of the previously established standards to give way to a better one is the crux of excellent governance. The new age CIO has more change management at hand than the operational role that typically has well-set governance. Change management is what needs strong governance. Such governance can be done only with the right organization, talent, discipline, and adequate automation. In most of the cases, not all these four exist making governance the most difficult of the CIO role. A good governance team can effectively use the opportunity to save and reuse the available resources by up to 30%.
Innovation is no more start-up founder’s job, but also the critical role for a CIO and their core team. There can be no one better to innovate than the employees of the business in which they operate. Innovations by companies in their industry have proven to be highly effective in reducing their cost as well as improving the employee and customer experience. Innovation in any business comes from two quarters, the business function who face the customers and can come with great ideas of improving the overall experience, while almost in every case the innovation is incomplete without technology involvement. The second area that has immense potential for coming out with multiple innovations is the CIO and their team itself. The opportunity for innovation for a CIO has never been higher as it is now. Those CIOs who miss the innovation opportunity, someone else in the business takes it up, and we have seen such CIOs getting either side-lined or shadow IT springing up in organizations. Every CIO must create the organization that nurtures innovation and questions everything intending to make it better. Such an approach works as insurance for future demands of cost reduction, just because the teams tend to get proactive than reactive.
These steps, even though they sound simple, may be one of the toughest to implement and get the best out of them, however getting cost advantage perpetually can only be done by thinking and acting differently.