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Managing Costs: What Really Works?
We asked leading CIOs. Their answers may surprise you. By Nicole Lewis Laurie Johnson: CIO The single most important thing we’ve done to manage IT costs is to invest in our people. By doing so, we see an immediate and long-term impact on our costs—in the tangible areas of projects that are on time, on budget and of high quality. If we focus on and invest in our people, the result is ownership and pride in our work. This is especially important in the IT world, where a team should become part of a solution and not just a tool. To accomplish this, we invest in three key areas: the skills necessary to succeed at the task; the leadership skills necessary to become a successful manager and leader (mainly, communications and relationship-building); and personal time, to help our employees understand that they are part of management and part of the strategy. The payoffs to these investments are real. UPS is one of the world’s largest package delivery companies and a leading global provider of specialized transportation and logistics services. Steve Phillips: CIO Avnet is committed to putting its IT team in lockstep with its business and using technology to improve productivity, efficiency and customer service. We continuously search for new ways to improve our service levels to both internal and external customers, and we decided to reorganize our IT resources across the nearly 70 countries that we support into one global, functionally aligned team. This has allowed us to easily share best practices, systems and tools from different regions and business units, while reducing redundancies. The global functional alignment resulted in significant cost savings for Avnet, reducing IT costs by more than 30 percent. It has allowed us to leverage our economies of scale and global purchasing power, collaborate more effectively on project work across regional teams and increase our responsiveness. As a result of these changes, Avnet, which is a $14 billion company, was able to realize a 29 percent increase in sales in fiscal 2006 with no increase to IT costs. Avnet is among the world’s largest B2B distributors of electronics products. Mimi Taylor: Corporate VP of IT and CIO Many organizations believe they are managing IT costs by reducing staff, eliminating new technology projects and delaying existing infrastructure upgrades. But taking these types of steps without carefully assessing the overall risk to the organization long term can prove to be more costly in the end. Instead, Baptist Health has followed a disciplined approach toward managing IT costs.We engage business leaders with IT leaders in the assessment of all major technology decisions. Although we have followed this approach for many years, over the last 12 months we have formalized the processes by implementing an IT Project Management Office (PMO).The IT PMO is responsible for examining IT requests for alignment with the organization’s overall mission and goals. Requests with a price tag of $250,000 or more undergo careful scrutiny; a Return on Investment (ROI) analysis must be completed and evaluated prior to committing funds or resources. The PMO is also responsible for conducting quality-assurance reviews of new system implementations against previously defined project goals, ROI and cost/benefit analyses. Formal updates of each major project are then provided to the appropriate executive committees. Baptist Health is the largest not-for-profit health-care organization in the state of Arkansas, with more than 120 facilities. Wanyonyi Kendrick: CIO Technology Services focused on five areas in our cost-transparency initiative:
The last item has had the greatest impact on both the quality and the cost of the services we offer our customers. The estimated cumulative savings from this combination of initiatives is more than 15 percent of our operating budget. JEA is the eighth largest community-owned electric utility in United States, providing electric, water and sewer services. Ron Ridge: CIO We implemented several large-scale IT endeavors over the past year, but one of our most effective in terms of boosting productivity and managing costs was outsourcing the control of our distributed PC infrastructure to a market-leading vendor. With about 2,000 employees worldwide, including more than 1,100 field technicians, providing 24 x 7 IT support and keeping PCs virus-free are critical to providing excellent service to our clients. By outsourcing our help desk, software compliance and theft-recovery services, we were able to shift about 60 percent of our IT support staff to amore pressing enterprise resource planning project, while automating patch management and achieving near 100 percent virus-definition compliance. We now have better control of our IT assets while realizing $200,000 in direct cost savings. Additionally, the increase in staff productivity because of limited PC downtime far surpasses our direct cost savings, providing dramatically improved total cost of ownership. BÖWE BELL + HOWELL is a leading manufacturer of document processing and postal solutions. Dr. Lynn Witherspoon: CIO After years of refining cost management — ratcheting down on personnel, equipment procurement, license and maintenance fees — we moved on to innovation and value. At Ochsner, IT investment resulted in electronic medical records and automated clinical processes. We improved access, largely eliminated costs associated with paper medical records, eliminated duplicate laboratory, radiology and other ancillary procedures, and eliminated lost charges and charge-posting lags. Our clinical documentation tools reduced transcription costs by one third. Our medication management system eliminated handwritten prescriptions and created a patient-centric medication list shared by all physicians.Communications tools facilitated information exchange between our providers and created necessary documentation. All our patients’ medical records are available to any provider anywhere. While we’ve obviously been working on this longer than this past year, it really all came together for us after Hurricane Katrina. During and after the storm, we lost no medical records, and records were available no matter where our scattered patients and physicians found themselves. We have created safer, more effective, more efficient health care by shifting our focus from managing costs to managing value.Ochsner Clinic Foundation is a health-care delivery system. John Von Stein: Executive Vice President and CIO One of OCC’s stated objectives for financial management is to keep unit costs flat to downward trending over time. So each line manager watches for and realizes cost-saving and cost avoidance opportunities; this results in favorable aggregate budget and unit cost variances over time. The key is to make sure that the other components of our balanced scorecard — operational excellence, innovation, leadership, integrity and customer focus — are not negatively affected as a result of the cost-containment efforts. It’s “smart cost cutting” vs. simple slash-and-burn cost cutting. Furthermore, the bottom-up approach to this means that the line managers are making the cost-cutting recommendations, so there is little or no “cram-down” feel to the cuts. This way, the cuts are embraced openly vs. being a morale killer. OCC is an equity derivatives clearing organization. Gary Gorson: CIO Whenever an idea is brought forward proposing a new technology idea or change, users know they must 1) justify the cost of making the initiative a reality, and 2) prioritize that initiative have outstanding. Requiring such a value proposition for all but the most trivial issues has resulted in clearer, more complete specifications and more thorough analysis of business process impacts. Along with clarifying the expected specific cost savings or revenue improvements, overall project costs are minimized as scope creep has been reduced and target delivery dates are more accurate. The prioritization step provides valuable input to the executive team that determines the relative priorities of business initiatives—assuring that all IT initiatives are in alignment across departments in the company. Shell Vacations Club is a hospitality and travel company. Dan Raven: Worldwide Director, IT Aplications By migrating to SAP’s NetWeaver platform, we were able to discontinue the services of an externally hosted, third-party supplier collaboration partner. This gave us more control to share accurate data with our suppliers in a timely manner. By moving to SAP Hosting, we were able to take advantage of SAP’s expertise in the NetWeaver environment as well as new, SAP-owned hardware, allowing us to retire our old equipment and eliminate maintenance fees on hardware. SMARTModular Technologies provides memory products and liquid-crystal display solutions. Nicole Lewis is a freelance writer and a former senior editor at Electronic Buyers News. |
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These days, one of a CIO’s most important tasks is to manage IT costs. To find out what really works, Smart Enterprise asked leading CIOs: “What has been the single most effective thing you’ve done to manage IT costs over the last 12 months?” Here’s a selection of their answers. 
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