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GartnerResearch

12RulesofITCost

Management

ByRobertNaegle,ChrisGanly,BryanHayes

1December2021

12RulesofITCostManagement

Refreshed1December2021,Published1July2020-IDG00730117-9minread FOUNDATIONALThisresearchisreviewedperiodicallyforaccuracy.

ByAnalyst(s):RobertNaegle,ChrisGanly,BryanHayes

Initiatives:ITCostOptimization,Finance,RiskandValue

CIOschallengedwithbettermanagingITcosts—costcutting,assetoptimizationandinvestingindeliverablesthatmattermosttothebusinesses’missionandobjectives—shouldapplythese12rulestotheirstrategiccostoptimizationefforts.

AdditionalPerspectives

■SummaryTranslation:12RulesofITCostManagement

(11August2020)

Overview

KeyChallenges

■ManyITorganizationslackaformalprocessandacommonlanguageforcontinuouslyre?ningcosts,optimizingITspendorprogrammaticallyinvestingtocreatebusinessvalue.

■Costcuttingisareactiveexerciseandfailstoconsidertherealimpacttobusinessoutcomes,objectivesandrisk.

■CIOsdonotactivelydrivetheirteamstomanageITspendwithaclearstrategicalignmenttobusinessgoalsandobjectives.

Recommendations

CIOsthatdesiremorestrategicapproachestoITcostoptimizationshould:

■Elevatetheculturalfocusandpriorityofstrategiccostmanagementbyimplementingaprogrammaticandproactivecostmanagementapproach.

■DemonstrateITstewardshipofcorporatefundsbycontinuallyharvestingundervaluedinvestmentstorecoverandreinvestfunds.

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■ImproveIT’scapacityforgreaterbusinessimpactbyimprovingtheef?ciencyandproductivityofcurrentservicesandassets.

■MovebeyondcostcuttingandoptimizationbyinvestingITresourcesinneworincrementalbusiness-valuedopportunities.

StrategicPlanningAssumption

Through2025,CIOswhoimplementthese12ruleswillbe60%moresuccessfulinelevatingtheirstrategiccontributiontotheirorganizations’missionandimproveITspendingef?ciencybyover45%.

Introduction

ForCIOsstrivingtobettermanageITcosts,thefollowing12rulesarecriticaltoasuccessfulcostmanagementprogram.

Analysis

Leadingorganizationsbene?tfromaproactiveandpersistentcostmanagementdiscipline,aningrainedculturethatregularlylooksforwaystorecovercurrentspendonprojectsandservicesthatareunderperformingorinwhichthereisoverinvestment.Costoptimizationisoftenaeuphemismforcostcuttingorspendreductionsthataredrivenbydemandstocutcostsinthewakeofabusinessneedoraneconomic-drivenrequirement.Costmanagementsuggestsanongoingdisciplineofanalysis,review,recovery,productivityimprovementsandreinvestment.

CIOsshouldusetheserulesasastartingpointforframingandguidingtheexecutionoftheircostmanagementstrategies.Foreachoftheserulesconsider:

■Howdoesthisruleapplytoourorganization?

■Whereandhowshouldwecustomizethisruleforourorganization?

■Areweactioningthisruleinoureffortstomanagespendanddelivervaluetothebusiness?Ifso,how?

■Whatshouldwedodifferentlytosavemoneyanddrivegreaterassetef?ciency?

■Whencanweputthisruleintoactionincostmanagementefforts?

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Eachruleissupportedwithasummaryoftheimplications,abrieflistofrecommendationsandlinkstoadditionalreadingthatwillprovidegreaterdetailinsupportofthede?nedrule.Wesuggestthatyoureadtherelatedresearchtogainadeeperunderstandingoftheserecommendations,andreachouttotheappropriateanalyststodiscussthespeci?cimplementationopportunitiesandchallenges(seeTable1).

Table1:RulesforStrategicCostCutting

AsyouworktoapplytheserulestoyouruniquesituationpleasebookaninquirycallwithaGartneranalysttohelpyouapplyandadapttheserulesortoreviewandprovidefeedbackonyouradaptations.

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AcronymKeyandGlossaryTerms

TCO

Totalcostofownership—theinclusionofallIT-relatedcostsofprovidingsolutions/services/technologies.

CostModel

Representationorvisualizationofcosts,structuredtoansweraudience-speci?cquestionsaboutcost(see“CIOsMustMasterFourViewsofSpendtoManageITFinances”).

RecommendedbytheAuthors

SomedocumentsmaynotbeavailableaspartofyourcurrentGartnersubscription.SmarterSpending:InvestinBusinessOutcomes

StrategicExecutivesManageCostsAcrosstheEnterprise

?2021Gartner,Inc.and/oritsaf?liates.Allrightsreserved.GartnerisaregisteredtrademarkofGartner,Inc.anditsaf?liates.ThispublicationmaynotbereproducedordistributedinanyformwithoutGartner'spriorwrittenpermission.ItconsistsoftheopinionsofGartner'sresearchorganization,whichshouldnotbeconstruedasstatementsoffact.Whiletheinformationcontainedinthispublicationhasbeenobtainedfromsourcesbelievedtobereliable,Gartnerdisclaimsallwarrantiesastotheaccuracy,completenessoradequacyofsuchinformation.AlthoughGartnerresearchmayaddresslegaland?nancialissues,Gartnerdoesnotprovidelegalorinvestmentadviceanditsresearchshouldnotbeconstruedorusedassuch.Youraccessanduseofthispublicationaregovernedby

Gartner’sUsagePolicy

.Gartnerpridesitselfonitsreputationforindependenceandobjectivity.Itsresearchisproducedindependentlybyitsresearchorganizationwithoutinputorin?uencefromanythirdparty.Forfurtherinformation,see"

GuidingPrinciplesonIndependenceandObjectivity

."

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Actionable,objectiveinsight

PositionyourITorganizationforsuccess.Explorethese

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