The “IT cost center” is still a common phrase shared in the executive boardroom of today’s enterprise. Unfortunately, perceived and real waste created from inefficient IT projects and platforms support this claim in many organizations. Poor cost control and implementation strategies, along with a long-standing stigma around IT cause many executive teams to react with cost cutting measures. While some degree of cost reduction may certainly be necessary, a more planful approach to understanding the levers to pull is usually in order.
At OneVision, we work with IT leaders who are building Digital Transformation and ERP strategies that are gamechangers. Let’s look at a few strategies used by top IT leaders that can have a real impact on shareholder value. We find that these strategies are enabled when IT has visibility into business and operational efficiencies. The right ERP and EPM platforms offer advantages for the IT decision maker. Let’s take a look at some key areas to improve with steps to get started on the right track and come out of the gate quickly. These areas of opportunity can transform perception of IT to truly being a profitability center that resonates across organizational lines.
Start with alignment.
IT that is not aligned to the business goals and priorities are in essence a cost center. This is not where you want your IT department to be cornered, so spend adequate time understanding how to pivot. The benefit of alignment cannot be over stated. In fact, major ERP/EPM projects start with a clear charter that institute this philosophy. You may use a major project such as this to get started, but do not stop there. The on-going exercise creates synergy and dialog needed to address real business challenges with innovative solutions. This level of connection with the business creates accountability on both sides of the table, since it forces clarification of objectives and vision. Consider these steps:
- Assess current project load and eliminate those projects without clear alignment. Don’t waste time holding onto shiny objects just because they may seem cool on the technology front. If they don’t produce a tangible business outcome, it’s probably not worth the time.
- Re-scope qualified initiatives. Now that there is better clarity into the business, it’s wise to reassess the requirements and objectives that yield success.
- Demand business level sponsorship. Make no mistake, IT supports the business and their goals. Without a business, IT is not necessary. To that end, accountable IT leaders rally the support of business sponsors to each qualified project. Creating this joint responsibility can have tremendous residual effects to ensure projects are seen to fruition.
The execution of IT initiatives is essential to creating profitability. The lack of implementation process, structure and leadership quickly erodes any gains made by alignment. When IT projects are prolonged, they create more cost and the lingering stigma of the “IT Cost Center” become more frequent discussion in and out of the board room. This perception is hard to defeat once it sets in, so IT leaders should embrace a strong strategy that combats inefficiencies in the department and overall execution of IT delivery. Here are a few ideas to kick-start efficiency.
- Start with end user-facing departments and ensure they have simple and effective processes. The helpdesk is a great place to spend time since many users interact with them and good and bad news around service travels quickly.
- Build a strong PMO. The project management office is where even the best IT initiatives can stall and die. Be sure that your project portfolio can be managed with the right ERP systems and processes. They will help to evaluate the project selection process, implementation methodology and track metrics to identify potential issues.
- Avoid getting into “Technical Debt”. Choose supportable, scalable and robust IT delivery platforms that prevent end-user frustration and IT involvement. At the same time, avoid over customization with easy programming fixes just to kick-start a large system, such as an ERP rollout. These quick fixes tend to create “debt” within your implementation, which will drain IT over time since it requires costly rework. Select systems with a proven track record, a reputation for great vendor support and have transferable skills to today’s workforce.
Capital is precious and protected in most organizations. IT is expected to provide innovation that supports business initiatives while minimizing capital outlay. While today’s technology environments can be capital intensive, opportunities for alternative spending tactics often exist. For instance, ERP systems can be built and scaled with cloud solutions allowing minimal upfront costs. This can allow the business to optimize capital spending in areas that can yield a higher return, and positions IT as a true executive partner. Try creative and efficient spending tactics such as:
- Maximize existing assets. Before investing in new technology, take a hard look at what’s available to the organization. Is there the potential to leverage unused capabilities, or extend the usable life of an asset? Create a capital spending matrix that compares your existing technology to business requirements. This can often reveal that you have options to limit or delay net new investments in favor of more critical business needs.
- Outsource appropriate infrastructure and projects. Businesses seeking smart ways to invest capital can transfer spending to operating expenses. Several cloud infrastructure options exist, along with leasing opportunities that can drastically reduce upfront costs.
- Develop a demand management process. A formal process can provide transparency to capital deployment decision making. Review the process with the business and encourage agreement on the priority and criteria used to determine how to spend. This structure provides visibility to others and fosters a dialog for common business goals.
Modern enterprises continue to think of innovative ways to improve the customer journey. With technology at the heart of today’s customer experience ecosystem, it’s imperative that IT be aligning to this charge. If there was ever an opportunity for IT to contribute to top-line revenue, it’s here. A Digital Transformation plan is commonly found in many business sales and marketing strategies to drive new sales. IT leaders should embrace automation, integration and improved customer touchpoints using advanced ERP platforms combined with intuitive user interfaces. Find possibilities for your Digital strategy by considering these possibilities.
- Plan for AI Friendly. An approach that considers AI is a powerful play in today’s world. Efficiencies gained with intelligent applications that can adapt to business operations provides a landscape to scale rapidly. This competitive edge is a great way to promote business growth.
- IT and Operational System Optimization. Orchestrate the delivery of products and services to your clients by reviewing any friction between People, Process and Technology. Modern IT leaders must build systems that allow these 3 principals to work seamlessly together. ERP and other critical Business Operating Systems can position these key areas to provide the highest value back to the company.
- End to End Integration. Although IT integration certainly improves efficiency, an end-to-end customer fulfillment vision creates a substantial business asset. Is there an opportunity at the customer acquisition level? What about project implementation, quality control, vendor interfaces and invoicing? These end to end improvements spearheaded by IT, align the customer experience to the business.
At OneVision, we work with organizational leaders to help create IT value. Our clients expect us to deliver the right technology, that enables the alignment and IT efficiencies discussed above. We are committed to IT and business synergy and are proud of the results we have accomplished.
As an example, we worked with a global Engineering and Construction client needing to consolidate systems after heavy M&A activity. They purchased three $1 billion entities, thus creating 7 different ERP systems. They needed to consolidate to 1 ERP platform in nine months to meet SOX requirements. Simultaneously, they were seeking substantial data center and back-office cost synergies.
After consolidating the ERP systems into a single platform, and reducing the IT footprint from 4 datacenters to 1, the company was able to yield the following ROI.
- Reduced overhead by 33%
- Reduced IT cost of data centers and back-office administrative functions
- IT alignment supported growth from $3 Billion to $7.2 Billion on the single ERP platform