Cut IT Support Costs to Drive Digital Business Initiatives

Cut IT Support Costs to Drive Digital Business Initiatives

Does your IT organization eagerly embrace digital transformation, or quiver in fear at the prospect of it?

If the former, you’re following the model of world-class IT organizations that run more efficiently and devote a larger portion of their process costs to new business-focused initiatives. That’s the takeaway from a study by Hackett Group, as reported in an issue of Computer Weekly.

“IT is constrained by sunk investments and legacy technology and skillsets, while it must also embrace the digital world of cloud, big data analytics, social media, the internet of things (IoT), and mobility,” the report states.

Hackett Group, a business advisory and transformation services consulting firm, found that while some IT organizations are overwhelmed, others are energized by the challenge and opportunity to operate at a more strategic level.

Those world-class IT organizations, according to Hackett, spend 21% less per user than typical companies and rely on 8% fewer staff. That’s a big difference when you’re looking to free up resources for investment in digital transformation.

“Hackett Group found that the top IT departments spent just 53% of their budgets on running IT, compared with 60% in typical companies,” Computer Weekly reported. “A larger percentage of process costs were committed to new business-focused initiatives (43% versus 32%).”

According to the report, “many IT departments have significant resources tied up in supporting ‘run-the-business’ activities, which detracts from their ability to support the higher value activities that drive business results.”

The publication interviewed Scott Holland, practice leader of the IT executive advisory program at Hackett Group, who urged IT to be “ruthless” in addressing applications that inhibit innovation.

“Successful companies look at their application portfolio and develop technology roadmaps,” Holland told the publication. “You have to learn to live with core investments.”

It’s rare that CIOs will recommend retiring those high-functioning “system of record” applications that are still providing business value and supporting mission-critical operations. But that doesn’t mean that you can’t run them more cost-effectively.

Software vendors naturally want to squeeze every dollar of possible revenue out of their customers. But there’s an inverse formula at work there: as the business value of the application declines, the relative cost of supporting it increases, due to forced upgrades, customizations, and often less-than-satisfactory support. The result is unhappy customers, as revealed in an illuminating Nucleus Research survey reported in InformationWeek.

Enterprises can free up costs to fund transformation efforts, though, by uprooting traditional vendor support models and creating a new model based on third-party support services.