Cost Management for IT Organizations

Join BearingPoint Managing Director, Julien Courbe, as he walks us through the latest edition of BearingPoint’s Financial Services Technology Journal on cost management for IT organizations. The fluctuations of financial services firms’ business volumes reflect the cyclical nature of the overall financial markets. These dynamics are often caused by specific crises or a slowdown in the economy. Professional IT managers know that controlling costs and aligning expenditures with overall business goals and spending are critical to organizational health. But it’s a classic case of “easier said than done.” With continuing overcast skies forecast for the global economy, every step you take to infuse your IT organization with fiscal agility now should be appreciated – at the bottom line and in every line of business.

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The November 2008 issue of BearingPoint’s Financial Services Technology Journal offers effective, up-to-date thought leadership on IT cost planning. From the critical right-now technologies (e.g., service-oriented architecture, cloud computing) to practices that involve outsourcing and out-tasking (i.e., outsourcing simple tasks) to new paradigms in service models, executives and technology leaders should find this journal to be an invaluable resource in their efforts to improve their organizational operating leverage.

Cost management – Financial Services Technology Journal

The fluctuations of financial services firms’ business volumes reflect the cyclical nature of the overall financial markets. These dynamics are often caused by specific crises—such as the most recent subprime mortgage problems—or a slowdown in the economy. These fluctuations require that executives and technology leaders have the ability to restrict spending levels in market downturns and quickly scale up when business volumes rise again.

During previous periods of market turbulence, executives have demanded budget cutbacks and cost savings from their IT organizations. However, because many IT costs are fixed, IT executives have limited options for reducing expenditures. Typical cost-saving initiatives entail rationalizing IT assets and resources and renegotiating vendor contracts.

Fixed IT costs cannot be scaled back easily to react quickly and appropriately to market downturns. Optimization of the “operating leverage,” which is defined as the percentage of fixed costs relative to overall operating costs, increases a company’s ability to lower its IT operating expenses quickly during an economic slowdown.

This issue of the Financial Services Technology Journal discusses approaches to optimizing operating leverage. We examine key areas or “levers” that often transition well from a fixed- to a variable-cost basis. Including articles that relate to these levers and provide key considerations for defining and assessing how to better manage IT costs.

Effective IT Strategies to Save Costs

Virtualization sounds like the Holy Grail for IT managers—and for executives in the cost-sensitive C-suite. Today’s world-class organizations increasingly see virtualization of their entire enterprise—from servers to security, from software processes to production utilities—as a means to control costs, better allocate resources and increase their return on IT investments.

Virtualization provides a smaller footprint for companies to achieve more benefits across the entire enterprise. Virtualization promises tremendous savings for large enterprises because it offers them ways to create discrete environments in which to develop and test software functionality. In addition, while virtualization has been of tremendous assistance in the development environment by helping companies introduce new applications into a complex operational environment, the real benefit is moving virtualized machines into the production and operating environment enterprise-wide.

The case for virtualization is compelling. IT organizations concerned about underutilization of assets, rising energy costs, improving efficiency in IT infrastructure, simplifying physical architecture, and the constant pressure to reduce technology expenses are adopting server virtualization in the hopes of reaping its potential benefits.

Read how to improve operational efficiencies with server virtualization.

We look forward to your comments.

Stimulating Innovation: Meeting IT’s New Mission

A survey conducted by IDG Research Services with CIO magazine sponsored by BearingPoint

Does innovation drive cost savings? Or does cost savings fuel innovation? The answer to both: Absolutely.

CIOs can introduce tremendous value into their organizations by optimizing the way that they manage their companies’ IT systems. They can deliver even more value, however, when they focus on executing strategic cost takeout, IT optimization and IT governance in ways that encourage and support ongoing business innovation.

That’s one lesson learned from a recent survey of 150 CIOs conducted by IDG Research Services. Among survey respondents, 66 percent cited the need to reduce costs as a driver for innovation.

The IDG survey makes an important point: Businesses that consistently press to cut costs have an advantage over those that don’t. After all, the former can leverage savings to support and stimulate further innovation, which strengthens the collaborative partnership that’s necessary between the business and its IT operations.

“CIOs are tired of cutting costs. And because the challenge of containing costs is not going away anytime soon, CIOs have an opportunity to turn this into an advantage by developing a business case for using savings to fund innovation and by rigorously managing their portfolios.”
— Pierre Champigneulle, managing director at BearingPoint

Access the full article for more information about this study.