Accelerating Digital Transformation in the Era of Budget Cuts
During my two and a half decades of experience in the IT industry, I have witnessed several CIOs going through budget cuts while they should have been focusing on transformative initiatives (that inherently require higher budgets).
Today is no different!
Amid the rising inflation and given the current geo-political scenario, it’s inevitable that several digital leaders may not get the expected budgets to drive digital transformation of their business. In such cases, enterprises might have to consider prioritizing only ‘must have’ initiatives and, eventually, cost takeout.
The cost takeout initiative, however, is often misinterpreted as merely being a cost-reduction exercise, including workforce optimization, stifling investments in innovation, and procurement-driven outsourcing or consolidation to a vendor with reduced total cost of ownership (TCO). On the contrary, cost takeout gives firms a significant opportunity to focus on improving operational performance while reducing cost and re-deploying the savings for transformations, making it self-funded in the truest sense!
Gartner calls out Strategic Cost Optimization as an approach that comprises three components – cost-cutting, performance optimization, and growth investment, stating that it is nearly impossible to deliver the kind of long-term cost efficiency that an organization requires when the budget is being reduced across all areas.
The first component, cost-cutting, is often the only area of focus during the cost takeout exercise undertaken by an organization, that delivers short-term benefits but adversely impacts the business growth in the longer run. Services performance measurement and improvements, identifying and implementing transformation levers, and modernizing delivery, on the other hand, provide long-term cost efficiencies, and are often overlooked by executives.
Why is strategic cost optimization more imperative than ever?
Adaptability - Digital transformation programs, driven by Public Cloud adoption, have intensified the complexity in technology by introducing microservices, service mesh architecture, containers, data lakes, PaaS adoption, and the like. The IT teams often struggle with bandwidth and skills in supporting the bi-modal IT that requires agility and quick adaptability to new technologies to deliver on business expectations.
Wastage - Such transformations create and leave an unoptimized IT infrastructure footprint with inefficient and unutilized assets, both hardware and software, in Data Center and Public Cloud.
Performance - New services based on niche technologies require different measurement metrics and tools, leading to a sprawl of Enterprise Service Management (ESM) tools. There is no single observability platform and centralized dashboard to measure performance and proactively identify and resolve service degradation issues.
The Pandemic - Costs have escalated in the last couple of years as IT teams had to make significant investments to upgrade the infrastructure and bring in new technologies to support secure remote working. In some cases, such setups are neither long-term sustainable nor secure, and merely patch works.
Implementing levers to optimize digital spend
A cost optimization initiative should first assess the IT estate maturity and identify the opportunities not only to reduce resource wastage but also to deliver on the business outcomes by maximizing investments in technology, optimizing tools and architecture, improving performance and security posture, and enhancing the end-user service experience.
There are cost levers across three key categories that help achieve the desired outcomes:
- ‘Operating Model’ change provides cost reduction from Day 1 with right shoring, insourcing to outsourcing, structural optimizations, role rationalization, and a predictable as-a-service commercial model.
- ‘Operations Transformation’ focuses on modernizing the current delivery services with the knowledge and SOP-driven operations, shifting from individual service SLAs to business SLAs and shift-left operations by injecting automation through a self-service catalog and self-healing scripts.
- ‘Technology Transformation’ drives the mid to long-term improvements in IT estate by maximizing the current technology investments, reducing technology debt, and implementing a next-gen platform towards achieving a minimal / no-ops model.
Performance and Cost Levers to Realize TCO
How should we approach such an initiative?
Microland’s Strategic Cost and Performance Management (SCPM) is a consulting service that evaluates an organization's IT estate, including Cloud, Apps & Data Center, Networks, Cybersecurity, Service Management, and Digital Workplaces with a focus on improved performance and optimized cost.
Migration factories play a significant part in offering efficiency, velocity, and scale while lowering risk. Leveraging our decades of experience in migrating data center workloads, Microland has developed a Migration Platform “SmartMigrate” which is tailored to match the needs of the Cloud and runs factory-based migrations efficiently and at scale.
A tailored framework, that uses Cloud Economics, such as, Microland’s Cloud Cost Management Framework (CCMF), goes a step beyond optimization. It utilizes a combination of toolsets and 4 key optimization processes, each focusing on architecture, utilization, process, and usage.
Furthermore, visibility and ease of access are the two key factors that affect the productivity of CIOs. Every CIO needs comprehensive reports with all the KPIs in place and in near real-time to give an accurate view of the IT performance at a glance, in the shortest possible time. Microland’s SmartInsights offers an industry-leading CIO dashboard to empower CIOs and help them take their organization to peak efficiency.
With the rapid and increased adoption of "Digital IT Operations" in the recent years, the demand for software bots has increased significantly. This demonstrates the essential need for organizations to ensure their IT professionals and specialists focus more on strategic and value-added initiatives than on the repetitive operations that they routinely perform. At Microland, MicroBots double up as ‘Virtual Engineers’ to aid the IT operation engineers. They can improve the overall effectiveness of IT operations and free up professionals to focus on high-severity incidents and automation challenges that can positively impact business.
To quote an example, for one of our clients based in the UK, Microland carried out the SCPM consulting over 6 weeks with the D-DAF approach (Define - Discover - Analyze - Finalize). The objective was to transform their IT landscape, helping them reduce spend and improve performance. We assessed their business operations, operational challenges, and IT landscape to suggest transformation initiatives across Cloud & Data Center, Networks, Digital Workplace, and Security, and created a ‘Journey to Value’ roadmap.
The client benefited from a £7M TCO reduction over 5 years which was achieved through delivery model transformation, operations transformation, and technology transformation. Additionally, the client saved over 20% in Cloud hosting charges. These amounts were made available to be re-invested in new transformation initiatives (like AIOps), which compounded value for the client.
The key focus areas in this SCPM assessment included:
To summarize, the primary objective of the management teams is to transform business models while boosting profitability. Microland’s SCPM assessment is effectively designed to fulfill the requirement of self-funding business transformation while improving performance and of course, minimize cost.
For more details on our SCPM assessment, mail us at email@example.com
Jul 04, 2023
Apr 28, 2023