Monday, August 30, 2021


The focal point is to calculate which IT-led business initiatives provide the greatest return, and which would be invested in the future.

Besides the human cost, IT is one of the most expensive business investments, and many IT organizations have been perceived as a cost center. In detail, Total Cost of IT includes all costs associated with building and operating a healthy IT organization such as workforce costs, hardware/software/license costs, systems costs, procurement costs, support costs, or investment cost, etc. 

Besides eliminating irrelevant cost, IT needs to have a long-term perspective of cost optimization via continuous consolidation, modernization, and integration.

Cost optimization is one of the top concerns for IT management to keep bottom-line stability and business efficiency:
Every IT finance group can capture costs, but the challenge is to have visibility and traceability between costs and the assets consuming those costs. IT needs to continue fine-tuning their own infrastructure, applications, and services via consolidation, modernization, integration, optimization, innovation., etc. IT management is not only the management of IT, but also the management of the entire company. IT needs to continually trim cost, ensure quality, adapt to changes, and work on consolidation, integration, modernization, optimization management lifecycle seamlessly.

The organization leadership team needs IT to be the business cost optimization expert for the company, optimizing costs to the greatest extent possible. It’s important to leverage the latest technologies or tools to continue trimming costs or retooling business processes. The cost breakdown provides insight into where the most money is being spent, which in turn identifies opportunities for bottom line improvements. In fact, there is never "enough" effort to improve efficiency, optimize operations, and fine-tune business capacity.

Actual expenditure should always involve a business case: IT means to the end, every IT initiative is the business initiative. Thus, IT expenditure should be the business related cost. IT management should actively measure what the quality and value of IT products/services is. High quality refers to simplicity, increased visibility and transparency of the business environment through eliminating something which is not used and saving effort on maintaining it for improving efficiency. Every new technology adopted must facilitate business but also bring down the incremental cost of growth and the time to market. That should be the true metric for IT return on investment – how have they been able to impact the top and bottom-line and facilitate growth and competitiveness.

The benefit of fitting IT is to reduce the TCO (Total Cost of Ownership) as it reduces a lot of redundancy in the business process which ultimately increases internal and external customer satisfaction, and by comparing the total cost of ownership to the return on investment. At some point in the enterprise evolution, business effectiveness and efficiency are also correlated specifically when the organization reaches its capacity. IT can play a leading role in improving corporate sustainability performance to ensure the long-term economic success of the enterprise. Better service for less cost is the continuous improvement agenda here for most organizations.

IT innovation related investment cost: To keep IT relevant, organizational leaders need to perceive IT as a silver lining for business growth and leverage IT to drive value across the business. IT leaders should invest more to improve their organizational capability and capacity to innovate and grow for reaching the next level of growth. The good IT investment may just be like the rubber meets the ground, all about where and when, bringing multifaceted value by holding business sponsors accountable for realizing the benefits outlined in a strong business case. This has to be about focusing on benefits generation, return on investment and contribution to innovation.

No matter what the percentage is to revenue, what should be included in the expense line for total IT spending. It’s always important to find creative sources of competitive advantages, to better compete in a global marketplace with optimized cost management. IT investment is the boardroom issue. If the Board wants to know percentage spend/revenue as part of a set of measures to ensure IT service provision is cost-effective and service-improving, look for investment initiative to be justified and governed on the basis of benefit delivery, return on investment and/or contribution to innovation, then the CIO is in a very good shape.

IT cost optimization and investments positively affect business productivity and customer experiences. The focal point is to calculate which IT-led business initiatives provide the greatest return, and which would be invested in the future. To reinvent IT as a value creator, business stakeholders have to be accountable for realizing the benefits, not IT. Total IT impact and total value should get more attention rather than just cost.



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