Michele Caminos, managing vice president at Gartner, said ICT departments today face the reality of operating in "a very lean environment".
The 'new normal', said Caminos, is an uncertain economy and tight budgets.
Cost reduction remains a high priority -- ranking number three among ICT leaders, based on a recent Gartner survey of CIOs.
But at the same time, she said, CIOs want to shift their budget away from "run" (mainly IT infrastructure and operations) - to "grow and transform".
"CIOs have really been driving down costs, and you have to wonder how much leaner we have to get," said Caminos, speaking at this year's MIS100 Event in Auckland. "So the question is, where do we go [to] have the biggest impact?
Read the 2012 MIS100 report on the top IT using organisations in New Zealand: http://cio.co.nz/cio.nsf/ciomis
"You do not look at low hanging fruit, you look at where the big chunk of your budget is being spent and right now it is being spent in infrastructure and operations," she said. "Sixty percent of your budget is still keeping the lights on."
She then listed 10 areas for cost containment CIOs can go through in the next 12 months:
- Re-examine networking costs
- Consolidate infrastructure and operations
- Virtualise infrastructure and operations
- Streamline IT operations
- Reduce power and cooling needs
- Contain storage growth
- Optimise multi-sourcing
- Enhance IT asset management
- Push down IT support
- Defer non-critical key initiatives.
The top five strategies, she said, "will give you the biggest bang for your buck."
She said Gartner's global survey of CIOs found three-quarters of IT departments have not fully explored and deepened these cost saving activities.
"What we are seeing on average is if you continue to be a level of involved or engaging in these activities you can save at least 10 percent over the next 12 months and up to 25 percent of your savings for the next three years.
"These are quite significant and not to be overlooked especially when we are working in a very lean environment," said Caminos.
She suggests working through the 10 areas as systems are interrelated and interconnected. "We have to have a very extensive view and a very comprehensive plan, we can't come in with a very siloed approach," Caminos told more than 50 CIOs in the audience. "Our advice is, you have to go through all 10."
Caminos gave practical examples of how to apply these principles, tackling the first area, networking budget, specifically telecom services.
"Work with your telecommunications provider to drive down costs," she advises. "Look at individuals with personal contracts for their telecommunications services and move them to enterprise contracts."
Another area is mobile phone usage. You may be buying more cellular minutes you need, she said. Although most organisations use these services they do not take full advantage of them.
Power and cooling is the number one issue to drive down costs. She said reduction in energy consumption will range from introducing "green technologies" such as refrigerant cooling at the device level, to real time infrastructure management.
Caminos also points to multi-sourcing, looking at areas where vendors can take over tasks, such as desktop management and legacy mainframes. She suggests Gartner's 12-step dialogue, with the aim of using outsourcing as a strategic rather than a tactical approach. The steps include establishing a sourcing strategy process and sourcing governance, and improving service provider relationships.
CIOs can also be involved in businesses at a "completely different level".
Caminos cited the case of a CIO in healthcare who worked with clinicians and reduced into four the 20 administrative tasks that involved tremendous duplication. "If he can save clinicians 15 minutes each day each year, that is time they can spend relaxing or visiting another client."
She also advises IT organisations to be "absolutely ruthless" with the cloud. "If it is not absolutely mission critical and [provides no] differentiation for your organisation, why do you have to have it internally?"
Another speaker, Paul Muckleston, managing director, Microsoft New Zealand, picks up on Caminos' point about moving to cloud services. He said rapid take-up of cloud in New Zealand is in education, SMBs and ISVs (software vendors). He expects the public sector to move to leadership position when it comes to the cloud in next 12 months.
He said New Zealand, however, is "not quite land of the long white cloud yet". He said in the enterprise space, there are "pockets" of cloud take-up citing the case of Air New Zealand and Fletcher Building. That will change as a result of confidence level of New Zealand commercial companies in the public cloud.
Lessons on change management
The CIO of the number one MIS100-ranked organisation this year, Johan Vendrig of healthAlliance, said the group is already working on eight of the 10 areas Caminos singles out for reducing IT costs. These include the top five, and deferring non-critical key initiatives.
Vendrig said the shared services organisation has achieved the restructure and initial change process.
See interview with Johan Vendrig: On a merger mission http://cio.co.nz/cio.nsf/ciomis
This is the second year healthAlliance achieved the top ranking in MIS100, which is based on screen numbers, business revenue and size of staff. healthAlliance was formed in 2011 and incorporates the IT services, finance, procurement and supply chain, process and service improvement and staff service centre for the Northern Region District Health Boards.
Today it has 245 staff, with three networks and three sets of processes. There are 26,500 users and 15,000 workstations, 1700 servers with 640 fully supported apps.
He said there has been significant programme of work in areas such as the regional data repository, regional finance and supply chain system and departmental systems. At the same time, he said, clinical and business leaders recognise information technology as a key enabler for many of the underlying strategies and initiatives in the sector. There is higher reliance on IT to keep patients safe and keep care effective, he said.
"Health is an information business," he states. "Most of what we do is actually research and planning care."
Vendrig shared some of the lessons learnt in the past year, such as the importance of governance and investing in change management. These included establishing a new management operations framework around areas like projects and finance.
Shared service is not an outsourcing arrangement, he said, and it is critical to sort out the regional governance structure first.
"Getting the basics right is the first thing you do," he said. "You can't talk about enabling healthcare change if you can't get services right."
Vendrig ended his presentation by highlighting the community spirit among New Zealand CIOs. Vendrig went on to thank the CIO community for the help and advice he received from fellow IT executives following last year's event, only a year into his new role as CIO at healthAlliance.
"It was very refreshing to share lessons," he said, citing insights shared by colleagues like Julia Raue of Air New Zealand and Mike Foley of Auckland Council. "It's important to know there is a light at the end of the tunnel."
Microsoft Services and Gentrack sponsored the 2012 MIS100 Event in Auckland, New Zealand.
Divina Paredes (@divinap) is editor of CIO New Zealand.
Sim Ahmed (@simantics) is a reporter for CIO New Zealand.
Join the CIO New Zealand group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.