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Gartner Research 10 Rules toRapidly ReduceIT Spend Shruthi Shankel, Robert Naegle, Sid Sahoo 9 January 2024 10 Rules to Rapidly Reduce IT Spend 9 January 2024 - ID G00796272 - 11 min read By: Shruthi Shankel, Robert Naegle, Sid SahooInitiatives:CIO Digital Leadership; National Defense Technology Insights; U.S. FederalGovernment Technology Insights In an uncertain and pressurized economic landscape,organizations often face the challenge of realizing immediate ITcost savings. This research features 10 short-term cost-cuttingrules that can help CIOs achieve their targets and minimize theimpacts on business operations. Additional Perspectives SummaryTranslation:10RulestoRapidlyReduceITSpend(24 April 2024) Overview Key Findings ■■In times of economic challenge, organizations often cut costs without a clearunderstanding of the potential consequences and risks associated withimplementing savings targets within a pressured time frame.Most IT departments lack a formal approach in implementing rapid cost-cuttingmeasures across their department.The risks of reactive cost cutting are often not well-defined, quantified or effectivelycommunicated, leading to poor decision making. This can have unintendedconsequences in the longer term and drive potential disruptions.■ Recommendations CIOs seeking to rapidly cut their costs as part of their cost optimization approach should: Establish your cost reduction fundamentals by defining the specifics of the costsavings targets and the time frame for implementation.■Apply Gartner’s 10 rules of IT spend reduction to determine the types of actions,expenses and categories that will have the most immediate and/or largest impact.■Map out plan to eliminate, reduce or suspend spend, and communicate it internallyto IT, the business units (BUs) impacted and the CFO/CEO driving the reductions.■Minimize the long-term disruptions of cost cutting by clearly defining and assessingthe potential consequences and risks associated with cutting costs in relation tosupported business outcomes.■ Introduction In uncertain economic environments like today, organizations face the challenge ofachieving immediate IT cost savings. Business and market pressures often dictate thatthis takes place in a rapid or immediate fashion, requiring more of a “cost cutting”approach. Despite the urgency, Gartner recommends that organizations take a structuredand programmatic approach to strategic cost management that includes an ongoing costreduction discipline (see Executive Essentials: Develop a Strategic Approach to IT CostReduction, Optimization and Investment). When faced with immediate or short-term pressures, CIOs still need to take a thoughtfulapproach to cutting costs, ensuring that they strive to mitigate the risks and minimize thelong-term impact on the organization. Figure 1 lists the 10 rules of rapid spend reductionthat can help CIOs to swiftly reduce IT spend while safeguarding performance in adynamic business environment. Figure 1: 10 Rules for Rapid IT Spend Reduction Analysis Establish the Cost Reduction Fundamentals In facing the challenge of delivering immediate savings, it is key to establish anddocument precisely what the need is, such as the size, timing and type of reductionrequired. To answer this, it is critical to define the desired outcome, the required time frameto meet it and the approach. The Outcome/Need Work with finance leaders to define the outcome(s) that is required in terms of the annual,ongoing or budgetary savings in hard currency figures. These should be definitive costtargets or savings goals calling out the focus area, whether it is reducing operationalexpenses, minimizing overhead costs or meeting budget/forecast targets. Timing After determining the size of the savings required, focus on the time in which they need tobe delivered. Emergency cost cutting will typically happen within weeks or months, oftensix months or less. Time given to plan cost-cutting exercises is often dictated by time pressure. However,planning should be prioritized, as it will drive the strategy, approach and timing ofexecution. It will also crystalize the goals communicated to the teams to identify anddeliver the savings, and avoid wasted time and effort throughout the execution of theexercise. The Approach The combination of the need and the time available to realize the cost reductiondetermines the approach. CIOs should determine and establish the enterprise’spreparedness and willingness to “spend to save.” Are there funds that can be invested todeliver significant savings? Is there time to achieve this? While spending to save orinvesting for growth are rarely options for rapid reduction outcomes, they should not bedismissed out of hand. 10 Rules for Rapid IT Cost Reduction Following are the 10 rules for rapid IT cost reduction that can be used to assess yourreduction options: 1.Focus on Cash Impact —Target those items that will have a real cash impact. Don’tfocus time