10 Cost-Effective Tech Strategies For Government Businesses
When many hear the term “cost optimisation” they often equate it with “cost savings” or “cost-cutting”. However, as recommended in various post-Great Recession reports (2007 – 2009), government organisations need fiscal policies and mature practices for economic growth to generate more revenue, as well as for optimising operating budgets, programmes and services.
This balancing act is not easy to accomplish. In addition to providing a safety net for complex public services, government organisations operate in quickly changing political, organisational and economic environments. Practices, policies and decision making are complex due to many factors, including governance, political mandates, and social and economic considerations.
As a reflection of these challenges, government respondents to the indicated that they are more likely to be susceptible to organisational disruption, funding shortfalls and labour disruption compared with the respondents in non-government organisations.
Three complementary routes can help in illustrating how government organisations can successfully navigate trade-offs among social and economic pressures while achieving their digital transformation ambitions. They are:
- Digital Business Transformation – Reimagining and transforming government services to deliver new programs and create new sources of revenue.
- Business Cost Optimisation – Improving and integrating business processes with data to manage public services through digital solutions.
- IT Cost Optimisation – Getting more value from existing IT investments through infrastructure modernisation, application rationalisation, consolidation, shared services and more.
Opportunities to optimise
To distinguish digital “optimisation” from “transformation” as they apply to government organisations, we need to define them separately as: optimisation is the process of using digital data and technology to improve existing business models, operating processes, services or outcomes. Transformation, on the other hand, is the process of exploiting digital data and technology to reinvent or create new business models, operating processes, services or outcomes.
Public sector organisations at all levels (local, regional and national) have varying mission-oriented goals in their digital journey. However, one of the consistent themes in this digital journey is optimising operational costs to provide “more with less”. Even in times of budget surplus when revenue collected exceeds operating budget needs, government organisations engage in cost optimisation strategies by allocating budgets to rainy day funds.
Chief Information Officers (CIOs) who have successfully optimised IT costs have teamed with other C-suite executives, particularly the Chief Financial Officer (CFO), to collaborate in enterprise initiatives. When doing so CIOs can achieve cost savings within IT and throughout the organisation, by focusing initiatives on 10 IT cost optimisation techniques.
1. Implement shared services
Some CIOs leverage IT shared services across business units to drive economies of scale. Most savings and cost reductions can range from 15% to 20% of service costs in 18 to 36 months, and the highest savings can reach over 25%.
2. Adopt a cloud-first policy where appropriate
Opting for a cloud-first policy offers a spectrum of capabilities ranging from infrastructure as a service (IaaS) through software as a service (SaaS). While many private and public sector organisations choose cloud services for increasing agility, flexibility and scalability, they also experience cost efficiencies over time.
3. Consolidate enterprise data centres
As organisations expand their operations, the cost of maintaining a traditional will increase. This drives some IT organisations to shift their data centres to data-centre switching architecture. Through data centre modernisation and consolidation efforts, cost savings can range between 10% and 20% of a data centre budget.
4. Rationalise and standardise enterprise applications
The application portfolio represents a large part of an IT budget. CIOs who standardise and rationalise their application portfolios can reduce and control costs. Savings can range between 15% and 25% of the application budget.
5. Improve IT financial transparency practices
Understand how IT services are being delivered and what the associated costs are for IT operations. Gartner refers to this as IT financial transparency. Work with CFOs and finance personnel to associate general ledger entries (asset-based view) to technical costs and related costs for business services. Such transparency in enterprise IT spending enables you to deliver business value and optimise costs via IT services.
6. Focus on IT demand-side spending for greater business cost optimisation
Approximately 96% of enterprise operating expenses occur outside of the IT department, which presents significant opportunities to reduce IT spending. By partnering with your peers from departments across the organisation, you can evaluate business processes, resources and capacity to determine where IT can improve productivity, efficiency and effectiveness.
7. Implement robotic process automation
Leverage technologies like robotic process automation (RPA) and (AI) to analyse and identify patterns that can then be used to make strategic business decisions. These technologies can identify new insights from data and automate or augment processes that are inefficient for humans to perform.
8. Evaluate IT asset management practices
CIOs often overlook asset management capabilities, and this oversight leads to increased IT operating costs. Shift IT asset management (ITAM) responsibility from “tracking” individual assets to corporate governance of IT and technology assets. Evaluating ITAM practices can achieve cost savings of 10% to 20%.
9. Evaluate digital business transformation ideas
Invite business stakeholders to contribute cost optimisation or technology application ideas. Share any savings generated from these idea-generating sessions with the department leaders and then potentially start a cycle of continuous reinvestment. Such a partnership can increase visibility within departmental IT spending and mitigate redundant IT expenses.
10. Optimise the workforce
Use workforce management application capabilities like automation of manager experience or virtual assistants for routine and common tasks to reduce staffing costs. Implement bots to augment the capabilities of human workers and enable a more productive work environment.
As you determine which of the top 10 suggestions you can initiate or continue to gain short-term cost savings, consider how you will also want to institutionalise IT cost optimisation as an ongoing discipline in how you operate.
GfK and VMware: Innovating together on hybrid cloud
GfK has been the global leader in data and analytics for more than 85 years, supplying its clients with optimised decision inputs.
In its capacity as a strategic and technical partner, VMware has been walking GfK along its digital transformation path for over a decade.
“We are a demanding and singularly dynamic customer, which is why a close partnership with VMware is integral to the success of everyone involved,” said Joerg Hesselink, Global Head of Infrastructure, GfK IT Services.
Four years ago, the Nuremberg-based researcher expanded its on-premises infrastructure by introducing VMware vRealize Automation. In doing so, it laid a solid foundation, resulting in a self-service hybrid-cloud environment.
By expanding on the basis of VMware Cloud on AWS and VMware Cloud Foundation with vRealize Cloud Management, GfK has given itself a secure infrastructure and reliable operations by efficiently operating processes, policies, people and tools in both private and public cloud environments.
One important step for GfK involved migrating from multiple cloud providers to just a single one. The team chose VMware.
“VMware is the market leader for on-premises virtualisation and hybrid-cloud solutions, so it was only logical to tackle the next project for the future together,” says Hesselink.
Migration to the VMware-based environment was integrated into existing hardware simply and smoothly in April 2020. Going forward, GfK’s new hybrid cloud model will establish a harmonised core system complete with VMware Cloud on AWS, VMware Cloud Foundation with vRealize Cloud Management and a volume rising from an initial 500 VMs to a total of 4,000 VMs.
“We are modernising, protecting and scaling our applications with the world’s leading hybrid cloud solution: VMware Cloud on AWS, following VMware on Google Cloud Platform,” adds Hesselink.
The hybrid cloud-based infrastructure also empowers GfK to respond to new and future projects with astonishing agility: Resources can now be shifted quickly and easily from the private to the public cloud – without modifying the nature of interaction with the environment.
The gfknewron project is a good example – the company’s latest AI-powered product is based exclusively on public cloud technology. The consistency guaranteed by VMware Cloud on AWS eases the burden on both regular staff and the IT team. Better still, since the teams are already familiar with the VMware environment, the learning curve for upskilling is short.
One very important factor for the GfK was that VMware Cloud on AWS constituted an investment in future-proof technology that will stay relevant.
“The new cloud-based infrastructure comprising VMware Cloud on AWS and VMware Cloud Foundation forges a successful link between on-premises and cloud-based solutions,” says Hesselink. “That in turn enables GfK to efficiently develop its own modern applications and solutions.
“In market research, everything is data-driven. So, we need the best technological basis to efficiently process large volumes of data and consistently distill them into logical insights that genuinely benefit the client.
“We transform data and information into actionable knowledge that serves as a sustainable driver of business growth. VMware Cloud on AWS is an investment in a platform that helps us be well prepared for whatever the future may hold.”