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22 August 2006

Six ways to cut costs

By Andrew Clifford

There are six ways to cut IT costs. Two of them are well known. The other four are yours for the taking.

We all pay attention to efficiency and price. We organise and control the work. We consider our sourcing strategy. We negotiate good prices.

But as well as efficiency and price, there are at least six more ways to cut IT costs. These are not management processes, but ways of looking at the world that help you see where you can make big cost savings. I call them "orientations", and the six orientations are: people, standards, systems, responsibility, value, and customer.

The first two orientations are well known.

A people orientation recognises that we need to work in ways that match our human nature. We need some structure, but we are not entirely systematic. We are creative, and we often change our minds. Our motivation makes a huge difference to our performance. In IT, much of this is addressed by agile methods and similar movements, and many organisations are already benefiting from these cost savings.

A standards orientation avoids the costs of running multiple technologies, and the costs of technology lock-in. Standards let you change your suppliers, and reduces the number of technological dead ends that force expensive redevelopments. The popularity of open systems, open source and commodity hardware shows that many organisations already have a standards orientation.

The other four orientations are much less common.

A systems orientation clarifies IT structure by thinking of IT as a series of discrete systems. It stops IT being seen as a sea of functionality sitting on top of multiple architectural layers. This simplifies IT management, and opens the way for cost saving techniques such as system governance. A system orientation is also a precondition of the next three orientations.

A responsibility orientation clarifies IT ownership by placing systems within the responsibility structure of the organisation. IT is not an unowned resource, shared amongst a loosely-defined set of stakeholders, or owned by the IT departments. A responsibility orientation helps you make better decisions on the value of IT, and avoid many business change problems. It stops IT being so much of a political football.

A value orientation clarifies IT value by focusing on the automation that IT provides, and separating this from changes to business processes. This helps identify where IT provides no value over manual methods, or where IT gets in the way. It helps us build smaller, cheaper systems that are easier to use.

A customer orientation clarifies the role of the IT department within an end-user organisations. Currently, most IT departments see themselves primarily as suppliers, selling IT into the business. Turning this around, and realising that you are the part of the business that buys IT helps you see where IT solutions are excessive.

Over the next few weeks, I will describe these last four orientations in detail, show how they cut costs, and how you can adopt them. Next week I will continue by covering the mechanism by which these orientations cut costs.

Next: Project manager required: heroes need not apply

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