The digital economy has improved the ease of doing business. But it has also made the business ecosystem competitive. Too many players chase a finite number of customers, leading to cut-throat margins. Raising prices comes with the risk of customers going away to competitors who charge less. The only recourse for most businesses is to improve efficiencies and cut costs. Through such interventions, they reduce expenses and pass on some savings to the customer to remain competitive.

Many CIOs understand this concept but stumble at the implementation level. Here are five cost optimization strategies and techniques most CIOs overlook.

1. Make Enterprise Systems Transparent

Many a time, enterprises suffer from cost opaqueness. They do not have full insight into the cost of their processes. Each business unit may have information on its expenses. But the company often lacks a comprehensive view of indirect spending at the enterprise level. There is no way to analyze and optimize costs at the project level either. The major causes for such silos are:

• Fragmented IT systems, with supplier data riddled with mistakes.
• Shadow IT set-ups by many departments, to get things done quickly.
• Multiple and inconsistent data sources. Many of such sources remain inaccessible from the central servers. Such complex set-ups increase planning and operations costs.

Identify such silos and harmonize the data from them to get consolidated views. This makes it easy to identify areas for savings, down to the line-item level. For instance, if data analytics unearths high travelling expenses, the CIO could step in and deploy teleconferencing options.

Such expense-line trimming is not enough, though. The onus is on CIOs to optimize the business value of IT across functional areas. 

• Look at supply chain management, inventory handling, and other operational facets, and identify scope for process efficiency through digitalization.
• Evaluate business processes to see where technology changes can improve productivity or efficiency. Understand the ways and pattern of delivery of IT services and the associated costs. Rationalize and optimize these costs depending on the value generated by such business services. For instance, if the value output of service is more than the IT cost to provide the service, there is an urgent need to restructure such service.

Depending on the size of the enterprise, it may be worthwhile to invest in data analytics and visualization tools. These tools apply data engineering to offer a consolidated data model and reveal the complete picture of operations.

2. Adopt a Cloud-first Policy

The cloud spares enterprises from investing in technology. It shifts expensive CAPEX investments to manageable OPEX expenses. Enterprises may attribute the cost to the service, consuming the resources, and bill accordingly. The following techniques help to cut costs with the cloud:

• Do a cost-benefit analysis to determine the profitability of any specific service. They may either bill the client for such costs or do away with the service.
• Apply strict data governance to leverage the cost savings associated with the cloud. The cloud improves enterprise agility, flexibility, and scalability, all of which deliver cost-efficiency. But savings with the cloud are not a given. If governance is weak, infrastructure and application costs will rise.
• Avoid vendor lock-in. Be wary of vendor lock-in through long-term contracts and high exit costs. Some vendors may have very low rates, but increase costs after a year.

This technology blog lists five ways to save money on cloud deployments.

3. Consolidate Data Centers

Migration to the cloud does away with on-premises data centres. But a full-cloud strategy is not a practical solution for many businesses. Most large businesses adopt a hybrid model, with a mix of in-house data centres and cloud subscriptions. CIOs who commit to data centre modernization and consolidation efforts save costs between 10% and 20% of the data centre budget.

• Implement hyper-converged infrastructure (HCI) to minimize the resources needed to maintain systems. Investment in HCI attracts up-front costs but reduces operational costs. It also delivers additional savings through operational efficiency and improved scalability.
• Place system, storage, and network administration under the same team. This eliminates duplication of efforts.

4. Consolidate Software and Other Resources

Hardware and software costs add up quickly. Consolidating allows doing more with fewer resources. It also skews pricing models favorably, since the enterprise looks at larger volumes.

Often, routine work pressures make IT teams ignore consolidation and asset optimization. Many times, the enterprise provides new hardware for specific projects and forgets about it. These resources remain underutilized even as the enterprise keeps on adding capacity for additional needs. The same situation plays out in software licensing and cloud subscription services.

• Conduct periodic asset inventory. Check systems for actual usage. Use free capacity before adding new ones.
• Adopt corporate governance for asset management. The conventional approach of “tracking” individual assets is ineffective. Switch to corporate governance for matching assets with total requirements. This delivers a cost savings of anywhere from 10% to 20%.
• Standardize the application portfolio. The application portfolio consumes a sizable chunk of the IT budget. Standardizing application portfolios saves anywhere between 15% and 25% of the IT budget.
• Implement shared services to consolidate resources across departments and functions. Many enterprises pair application and production support services only with specific product groups. This prevents resources from contributing to other enterprise functions, causing duplication and wastage. Shared services ensure optimized use of assets at the enterprise level.
• Consider hybrid services for resources that do not benefit from being part of shared services. Hybrid models consolidate resources in similar product groups. These groups are still part of the specific group, but the business needs to define its priorities and usage.

5. Invest in Automation Judiciously

Automation involves sizable upfront costs and effort. It is hardly an overlooked strategy either. But the investment often pays back for itself in a short time and delivers big savings from thereon. The trick is to channel the investments where it delivers the maximum impact.

• Identify the most expensive cost centres and invest in robots to do such tasks. For instance, automate report generation, and preparing invoices. Apply automated algorithms to automate shift scheduling. The pre-requisite is to develop a workflow prototype that streamlines such processes. Use data visualization to develop and iterate the processes.
• Focus on overlooked staff functions. Many enterprises limit automation to the core operational process. Automating administrative processes, where sizable indirect costs are incurred, may deliver better savings. The trick is to automate processes inefficient for humans to perform.
• Deploy virtual assistants for routine and common tasks that take too much time for human employees to complete. Robots do not need salary or time-off, and they do not suffer from productivity dips either.
• Offer self-service options for external and internal customers. Today’s customers are impatient, but also go-getters. They expect instant results and loathe waiting. Deploying self-service solutions improves satisfaction levels and cuts sizable HR costs as well.

Automating tasks may not justify the investment when considered in isolation. But the savings add up when considering the big picture. For instance, Gartner estimates virtual call assistants to reduce call, chat, and email inquiries by 70%. The savings per voice engagement is 33%, on average.

Cost-cutting improves efficiency and improves the competitiveness of the firm. But CIOs should be on their guard not to become “penny-wise, pound-foolish.” Most times, investment in new technologies or processes pays back for itself and makes the business future-proof. Without such investments, the biggest becomes technically retarded and unable to compete. Make resource optimization a part of company culture, but do not miss out on growth opportunities.