“A budget is not just a collection of numbers but an expression of our values and aspirations.” The famous quote by Jacob Lew is the way a CFO defines the budget cuts every year. The CIO, however, faces ever-increasing business ambitions with an ever reducing budget.
Come December, corporates in the US get busy with their annual budgeting. This is the time when the CIO and the CFO get into a new kind of relationship ‘Relationship of Budget Cut’ that lasts for a couple of months when further negotiations, headcount reduction and in some cases cost reductions through DIY model also gets activated. This whole exercise gets repeated year after year with the CIO and his planning team spending more time on how to reduce expenses instead of executing the digital transformation.
CIO challenges have indeed increased manifold over the last decade, and budget cuts are one of the most significant problems that consume the CIOs faster than anything else.
ScrumStart studied various corporations and found five methods that can help every CIO in managing their costs far better and help them achieve better results.
- Start with a POC: Any new initiative should ideally be done to prove the success formulae by initiating a proof of concept. This should be preferably done to find savings possibilities if things were to be done the next year differently. Such a POC will give CIO and the business better confidence in achieving the outcome planned.
- Governance: Most of the expense leakage happens because of governance issues. Getting overbilled, underutilized workforce, unutilized resources and lack of coordination that ends up increasing the cost of delivery is a common problem for every technology team. Effective governance can help create a highly effective technology team that almost in every case remains far more cost-effective.
- DIY: Many companies use lower cost offshore locations like India to set up the technology units that help them get an effective outcome at far lower cost. While traditionally it is done through IT providers who also provide cost-effective solutions, doing it themselves is always the most cost-effective provided a good governance setup supports the CIO.
- Automation: Digital transformation is no more a choice but a necessity. Automation has opened up immense scope for improvement of services while becoming cost effective as well. The only catch that comes is the initial investment and people management that a CIO struggles with if not planned well.
- Becoming a consultant to business: Business is the end user of every technology service that a CIO has in their arsenal. CIOs struggle to influence their business with their ideas on how technology can bring a positive change in their business. Very few CIOs have consultant minded team members who research and suggest business various technology projects that motivate business to open up their purses. Lack of business sponsorship is the main reason why annual budget cut has become a routine practice instead of an increase in the technology budget that should be the apparent change expected.
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