Mimi Browning | Executive Suite: The myths and realities of IT cost savings
- By Mimi Browning
- Nov 16, 2006
Is information technology cost savings an oxymoron? There are no easy answers. Even in tough times, federal IT budgets stay constant or increase. Also, as cost-cutting initiatives gain prominence during the election years, IT is frequently called upon to demonstrate infrastructure and mission improvement cost savings.
Yet government organizations have difficulty demonstrating actual IT cost savings. Thus the perennial congressional question''What did I get for the $200 million I gave you last year?''remains unanswered.
Not only is there no silver bullet for this challenge, there is barely any gunpowder left to fight the battle. To demonstrate IT cost savings, federal managers should consider a pragmatic approach that includes leadership, a portfolio of success probabilities and cultivation of the evil IT twins, metrics and enforcement.
Strong leaders across the organization are key to achieving success in IT cost savings. Working together, they can develop policies and procedures, and align IT cost savings with the organization's strategies for cost containment. IT executives can also help debunk cost savings myths that frequently fly about the 'C' suite.
A recurring myth is that the latest IT toys will magically save dollars. They won't. Sadly, the toys often end up abandoned, since they were purchased with no implementation plan in mind.
Another myth is the vaunted private-sector claim that billions of IT dollars have been saved due to consolidations, enterprise resource planning and so forth. Not totally true. Many of these IT cost savings, such as consolidations, mergers and acquisitions, are a direct result of pink slips'not necessarily industry best practices.
Since not all IT cost saving strategies have equal chances for success, a portfolio approach minimizes risk and enhances results. A credible portfolio includes safe bets, obligatory transformation efforts and wild cards.
Safe bets, the easiest IT cost savings to demonstrate, include initiatives such as data center/server consolidations and enterprise IT commodity buys.
Next are the obligatory transformation efforts that involve system consolidations and/or process streamlining, such as OMB's Lines of Business and the DOD Transformation Initiatives. Be prudent on how many of these transformation initiatives to throw into the cost savings portfolio, since they take time to achieve, and savings are harder to demonstrate.
For many, the primary cost savings is personnel. In government, personnel savings accrue from payroll losses (attrition and retirements) and from personnel redeployments. Either way, the savings generate more political impact (members of Congress can claim credit for reducing the bloated federal bureaucracy) than actual dollar savings.
Last are the portfolio's wild cards. These include implementing ERPs, outsourcing initiatives and (for aspiring IT Don Quixotes) data standardization. To meet your numbers, offset these wild cards with guaranteed commodity buy savings.
Leadership and portfolios cannot produce results without metrics and enforcement actions. Metrics include such IT and mission measures as service-level agreements for computer operations, percentage decreases in the number of software licenses and increases in customer satisfaction. Often, well-intentioned strategies are not enforced. If metrics are tedious, then IT cost savings enforcers should be given huge cash bonuses for their efforts (perhaps the only way to get this decidedly unglamorous task accomplished).
Is IT cost savings an oxymoron? It is if you don't have a strategy with follow-through. It is not if you take a pragmatic, disciplined approach to achieving results.Mimi Browning is a former Army senior executive who is currently a principal at Booz Allen Hamilton Inc. of McLean, Va. She can be reached at email@example.com