IT executives continue to be challenged by their ability to meet cost and agility demands from business partners. This is largely due to the fact that today’s IT cost is predominantly devoted to “running the business” (80%), leaving very little for “changing the business” (20%). Recent analyses also suggest that the cost of running infrastructure is increasing disproportionately to the cost of application developing, further impacting business innovation. Your CFO has reasons to be skeptical about increasing IT budgets, as only a small part of it goes into value creation.
So, does it mean that we should rationalize our IT spend – cutting the cost of ongoing operations and provision more for strategic investments? It is more complex than that. Incremental measures, ad hoc cost cutting, siloed re-structuring has happened for a while and has yielded very little. It is time to overturn the cost model itself.
Does the root of the problem lie in the cost structure itself? How can IT be a self-funding function, keeping itself aligned with changing business imperatives? How can we set a methodical roadmap to such a cost structure? This white paper suggests how the much needed transformation can be brought about.
Client Challenges
- Increasing cost of IT operations.
- IT budgets consumed by ongoing cost of IT (Running the Business or RTB), leaving very little for new strategic investments (Changing the Business). Current average RTB in the industry is 80% and is increasing ominously.
- Infrastructure cost increasing year on year but with very little change in the operating model.
- Incremental rationalization of IT cost and cost-cutting measures are not yielding sustainable results. Holistic approach needed to transform the IT Cost model
TCS Approach
- A transformation model with an approach that mitigates risks and reaps benefits on the way.
- Identify quick wins. Aim for a cost structure that makes IT self-funding.
- The approach looks at three key interdependent transformation levers applied in a concerted way:
- Infrastructure optimization – Start with server virtualization; end with adopting utility computing model. The objective is to make cost centers chargeable, thereby supporting better governance and planning.
- Application Re-architecting – Simplify and re-architect applications by better alignment with business imperatives. Adopt operating models based on SOA.
- Strategic Resourcing – Devise and implement global sourcing strategies. Enhancing offshore leverage based on better cost models around network delivery and managed services.