InBrief: IT Value/Cost Optimization

What It Is: IT Value/Cost Optimization is the process of adjusting IT spend relative to the value being created through IT services in the interest of finding the optimal balance for an organization

Why It Matters: When organizations face financial challenges, there is often a desire to reduce expense.  The challenge is that the activity is often managed as a cost cutting exercise focused on direct labor, without regard to other, less disruptive opportunities that exist if a more holistic approach was taken

Key Concepts

• Optimization should be a continual activity.  Doing it periodically increases negative impacts
• The activity requires a clear understanding of costs (direct and indirect) and value being created
• Where spending isn’t governed, it is likely inflated and suboptimized
• The scale and complexity of a technology footprint has a direct relationship to labor cost
• Direct labor should be the last lever adjusted.  It represents the potential to create value
• Every $1MM you save in other ways is 8 headcounts (@$125k) you could have to perform work
• If you can eliminate >5% of your workforce for performance, you aren’t managing it effectively
• In the event labor ever becomes “numbers on a spreadsheet”, ask someone else to manage cost
• In my experience, people would take other levers more seriously if their headcount was in play

Approach

• IT Operations – Provide critical, minimum data to enable benchmarking and governance
• Portfolio Management – Ensure effective prioritization, slotting, and resource utilization
• Release Strategy – Have a disciplined to minimize operating disruptions and optimize utilization
• Enterprise Architecture – Establish a capability to develop blueprints, simplify, and standardize
• Applications – Rationalize on an ongoing basis to manage costs and promote speed-to-market
• Data – Promote interoperability, minimize data movement, and avoid monolithic solutions
• Artificial Intelligence – Establish a disciplined and governed process for AI introduction and use
• Technologies – Minimize duplication and manage end-of-life to avoid disruptive costs
• Infrastructure – Unless there is a legal or compliance-related reason, shift to external providers
• Cloud – Develop a FinOps capability to review and adjust resource consumption to avoid waste
• Licensing – Establish an ongoing process to review, optimize, and manage license transitions
• Modernization – Actively modernize solutions to avoid episodic efforts that increase costs
• Services – Define a workforce and sourcing strategy, govern relationships, negotiate effectively
• Labor – Establish a competency model, manage utilization effectively, handle underperformance

For Additional Information: Optimizing the Value of IT

Excellence doesn’t happen by accident.  Courageous leadership is essential.

Put value creation first, be disciplined, but nimble.

Want to discuss more?  Please send me a message.  I’m happy to explore with you.

-CJG 10/30/2025