We state our standpoint concerning IT Cost Reduction as a fable - enjoy.

Once upon a time there was a CIO. His name was Charles Lever, a reliable and good man. One night a good fairy turned up and spoke to him: “Dear Charles, as I have experienced you as a good man and very gifted CIO I would like to reward you. I trust an entire and very well organized IT department to your care; it will be of high benefit for the company and all stakeholders will be very pleased. You can let it grow but watch out that it doesn’t get too big. When you cut some parts it will grow again, just be careful not to destroy the roots and main branches. Cherish it well and you will be royally rewarded.“ This said, the good fairy vanished.

Time passed, the economic climate grew tougher, a new CEO, Mr. Chuck Risis and a fresh CFO, Mr. Stuart L. Ashcost from Scotland came on board. C. Risis spoke with Charles and instructed him to cut the IT costs drastically. With the current poor company performance and outlook, also the IT department is asked to take its share. Charles Lever was forced as everybody else to reduce IT costs dramatically. Consequently, Charles released staff, stopped contracts and projects and reported back about his successful actions.

One evening C. Lever remembered the words of the good fairy. He started wondering whether his IT was already too small. How can I detect when I start cutting too much? Should I define some performance indicators to know the critical size in good time? Do I need to make a case for long-term infrastructure projects as they should support our company’s new plans? Charles dropped into a dreamless sleep.

The good fairy returned in november. “How is your IT department doing?” “I save and cut” the CIO answered “but I do not know how far I can go and this gives me quite some headache.” “How shall I cope when the economy swings upward again and IT needs to be ready supporting growth on short notice?” “I am glad to hear that your thoughts consider such aspects even in a recession period” the good fairy replied. “Growth is not only dependent on the seed but also on the conditions, a project-friendly environment, the right people in the right role and a sustainable long-term approach”. “Are you focusing and investing enough into these topics?”

Key agenda item of the next management board meeting was the review of various saving initiatives. C. Risis made an introduction on the business outlook and commented: “The saving measures of the IT department leave a lot to be desired recently. C. Lever what is your position?” “Considering our today’s situation we need to balance three important elements”, Charles answered. “What exactly do you mean by this?” S. L. Ashcost interrupted him. “I mean that there are 3 different approaches to reduce IT costs: Cost cutting, Cost freezing and Cost optimization. So far I have concentrated on the first two measures but have totally ignored the optimization”, the CIO elaborated. “Optimization…” breathed the Scotsman. “Yes, I want to organize my IT in a manner that it turns to a hotbed for our company. This will allow us to be ready in all key business areas once the next upturn appears.” “Fair enough, but don’t we optimize already?” replied the Finance manager. “No, despite that we have acted very fast by cutting costs, stopping projects and releasing staff our approach is not sustainable – our IT costs will rebound within a year”. “ When we want to achieve lasting IT cost improvements we need to focus on our governance structures and effective Portfolio and Service Management”, the CIO continued.

A heated discussion started that lasted all afternoon. At the end C. Lever left the meeting room with the order to elaborate a two year cost optimization proposal.

We from november have not personally met the good fairy yet, however we know the three approaches very well and understand how they are best applied. Any question – please contact us