Aug 25, 2020

10 Cost-Effective Tech Strategies For Government Businesses

Public sector
Strategy
Scott Birch
5 min
Irma Fabular, public sector technology expert at Gartner, shares 10 opportunities for businesses
Gartner’s public sector technology expert, Irma Fabular, shares 10 opportunities that government businesses can use in their COVID-19 recovery...

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 2020 Gartner CIO Survey 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 cost optimisation 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 data centre 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 artificial intelligence (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.

For more information on business topics in Europe, Middle East and Africa please take a look at the latest edition of Business Chief EMEA.

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