BANGALORE, INDIA: Enterprises increasingly expect CIOs and IT to deliver solutions that make a difference to business strategies. But many times CIOs far exceed their IT budgets thus impacting on the company’s growth. However, Gartner, a leading information technology research and advisory company has proposed a “25-points formula” for companies towards cost containment and improving their performance.

The need arises because in 2008 and beyond, CIOs will need new skills, roles, relationships and approaches to create distinctive business-relevant IT solutions.

Talking to CIOL, Tina Nunno, Vice President of Gartner CIO Research in her presentation on ‘Delivering IT cost containment while delivering business results’ said we are helping CIOs and their organizations around the world improve their performance and contribution. In fact, it is 25 common IT cost containment techniqies framework to indentify opportunities.”

Nunno says, “large enterprises are experiencing phenomenal growth and some companies IT budgets are up by almost 200-300 percent annually. More ever, these companies are also looking at new technologies to improve performance and make organizations more competitive. But such organizations are not focused on cost containment.”

In order to curb this, Gartner has rolled out a “25-points formula” to help CIOs cut costs. (See chart below) 

In India, Nunno and her team from Gartner were recently on a three city tour – Mumbai, New Delhi, Bangalore meeting CIOs from various verticals. Gartner has targeted companies with $1 billion revenue.

CIOs are using a mix of cost containment techniques that also yield business benefits. These include:

* Understanding your cost structure and potential for savings
* Link costs to demand
* Reduce resource costs
* Change operational practices

Nunno said, “enterprises install what they want, when they want resulting in upscable portfolio. The Gartner team were in India to put in place – good management practices on a long-term and short-term basis.”

Some techniques just save money or delay expenditures while others also provide business benefits because they reduce complexity and/or provide flexibility and also improve service levels, increase agility and also reduce risks.

"It is more expensive to be reengineering rather than put it right the first time," remarks Nunno.

Gartner is preaching its 25-points policy to cut costs and drive business values among Indian CIOs. "The formulae was very successful in the Americas and Europe as well, she says.  For example in a Project Management Office (PMO) is needed for a large enterprise. However, only a few companies have small management offices that has led to duplication. So in a PMO, by avoiding duplicate projects; killing of projects that don’t work; reducing labour by offsourcing and also reducion in technology costs like printers can lead to a 20 percent cut in the IT budget spending in the first year of implementation, says the Gartner's report.

Nunno illustrates by highlighting on a South African-based company -- Sasol Technologies by using the IT PMO and IT governance council were able to reduce costs on overruns by less than 5 percent besides also gaining customers’ satisfaction. In fact, Sasol Technologies is an energy company with a $11-billion turnover having over 30,000 employees.

Likewise, Sul America, an insurance company based in Rio using capacity-on-demand and re-engineering experienced a 50 percent reduction in telecom and print costs. The company has about 5,300 employees and over 6 million customers.

Fortis, a Belgium-based Financial Services provider using an integrated, multi-year plan to transform information services and technology has reduced complexities. It has reduced IT costs by 10 percent by consolidating platforms & systems into shared service centers and by implementing ITIL to standardize processes and also reducing operations staff by 20 percent.

The company has also reduced informational services costs by 5 percent by standardizing project management process using Prince2 and also increasing CMM1 level from 2 to 3 in all units. “We are attacking IT costs in an organized way on many fronts, while reducing complexity and risks and improving services,” remarks Patrick Goffart, IST performance manager at Fortis.

Nunno says that 1-25 techniques will be a comprehensive approach for all CIO to optimize in every possible way. So I recommend all companies to consider all the 25 techniques that are crucial for de-diligence. “It also makes CIO more comfortable that they have done well and are to benefit the organization. I would like to also add that these pointers are for all companies be it large, medium or small enterprises,” adds Nunno.