Ten Business Cost Optimization Ideas

By: John Roberts, research vice president and distinguished analyst with Gartner’s CIO and Executive Leadership team

While most CIOs are familiar with the idea of IT cost cutting, the evolution to digital business means IT departments need to look beyond simple expense-line trimming and instead focus on optimizing the business value of information technology. Organizations may have exhausted the low-hanging fruit for saving money, but to be successful cost optimization should be a continuous exploration of technology that adds business value.

Cost optimization in the age of digital business means that organizations use a mix of IT and business cost optimization for increased business performance through wise technology investments. The key to effective enterprise cost optimization is to have proactive processes in place as part of business and technology strategy development to continually explore new opportunities.
Check the current system of cost optimization against these 10 recommended focus areas to exploit information technology to improve business outcomes.

1. Digitalization of business processes
Moving organizations toward higher levels of appreciation for business processes as essential corporate assets remains a challenge in the digital business landscape. Develop an integrated approach that brings together required competencies and expertise, along with buy-in from the executive leadership team. Establishing process management as a part of the enterprise fabric will ensure change becomes a continuous normal process.

2. Continuous improvement culture
Enterprises sometimes become trapped by the attitude of “this is what we’ve always done,” which can create waste. CIOs need to work collaboratively with business leaders to identify and remove this waste, which is typically in the form of reworks or delays due to issues further up the line, to focus on lean improvement efforts.

3. Customer self-service
Today’s customers expect answers quickly and on demand. CIOs need to establish a strategy to handle self-service technologies, which must be continuously updated and based on the customer’s perspective and experience.

4. Improving business efficiency through analytics
Don’t underestimate the value of analytics beyond conventional business intelligence. Not only can advanced analytics save lives, reduce customer churn and make equipment safer, utilizing the provided information to gain even single-digit percentage improvements in areas like customer retention or marketing responses can have a big impact on the business.

5. Improving data management
Use enterprise information management to treat information as a company wide asset. This means people from across the enterprise will have access to data, and will be able to share and use that data to create business value through better and faster decisions.

6. Process automation
CIOs and business leaders need to go beyond the current use of automation to robotics, and leverage the Internet of Things (IoT) and smart machines to build intelligent business processes.

7. Improving asset management
Information about assets is a critical asset itself. Utilize the IoT to offer real-time information and performance to allow the enterprise to make better decisions about assets.

8. Supply chain optimization
Supply chain leaders enjoy 20% to 50% lower supply chain costs than average performers. CIOs need to work collaboratively to look beyond cost reduction to enable increased sales, using a mixture of conventional and unconventional techniques to optimize IT and business costs.

9. Improving inventory management
Inventory is a challenge for business leaders since it exists paradoxically as both a supply operating lever and balance sheet financial asset. However, since inventory is a working capital asset, reducing inventory will contribute directly to the bottom line.

10. Business process outsourcing
Managing business process outsourcing (BPO) for companies is challenging, particularly when services are not contracted with a strategic business service or partnership in mind. Focus on business outcomes, such as customer satisfaction, to impactfully manage BPO services.