The last decade has brought many changes for IT in the enterprise and how it is managed. IT cost management is one facet that has evolved greatly as more stakeholders realized the importance and value of IT as a driving force of the business. Many CFOs, CEOs and other business leaders now help share the responsibility of the IT cost management function with the CIO and work together to improve it.
To truly be effective in their new IT cost management role, CFO's will need to become more knowledgeable about where the money is being spent. They will need to ensure that the budget allows for new IT initiatives and that wasteful spending is eliminated. Every CIO should be prepared to answer the following six questions to help their CFO be effective:
1. What is the best option for support?
It is highly possible that you are currently paying for support that you don't really need on a overpriced vendor support agreement. Take the time to review your support agreements and compare them to other support options like a third-party. You could save tons by switching providers or downgrading some of your premium services.
2. Are we locked-in with current vendors?
Working with a preferred vendor for every purchase is easy because it is familiar you may even get loyalty discounts. But if you never compare the prices of alternate vendors, you will never know if you are truly getting the best deal available. Check out the competition and use any information gathered to your advantage on your next purchase. Or, you may even find a new vendor that better fulfills your needs.
3. Can we benchmark our IT costs?
Being complacent with your vendor's terms and prices is a sure way to pay above fair market value for your IT purchases. Because there isn't a price list available for most IT products and services, it is up to the CIO to know current pricing standards and demand fair prices and transparent terms on all purchases.
4. Should we create a position for IT purchasing?
Over the last decade, IT purchases have become increasingly more complex and now require a unique skill set to be managed effectively. IT managers usually don't have the sourcing knowledge and purchasing doesn't have the IT knowledge. To solve this, many companies have started creating Vendor Management Offices (VMOs) and IT Controller roles to achieve optimal results in IT purchasing.
5. Does our contract include fixed-fee engagements?
Ideally, you should answer no to this question since fixed-fee engagements are really not fixed at all. In most cases, loop holes in your contract allow for overage charges and fees to be tacked on to the initial fixed fee. Negotiate the terms for your engagements based on time and materials if you want to avoid overpaying.
6. Will IT purchases support the organization's objectives?
IT investments can be extremely expensive and risky. Help minimize the financial risk and poor purchasing choices by making sure that IT managers are well aware of the needs and goals of all other departments. Aligning IT purchases with the objectives of the entire organization will ensure that the investment is a good decision.
To truly be effective in their new IT cost management role, CFO's will need to become more knowledgeable about where the money is being spent. They will need to ensure that the budget allows for new IT initiatives and that wasteful spending is eliminated. Every CIO should be prepared to answer the following six questions to help their CFO be effective:
1. What is the best option for support?
It is highly possible that you are currently paying for support that you don't really need on a overpriced vendor support agreement. Take the time to review your support agreements and compare them to other support options like a third-party. You could save tons by switching providers or downgrading some of your premium services.
2. Are we locked-in with current vendors?
Working with a preferred vendor for every purchase is easy because it is familiar you may even get loyalty discounts. But if you never compare the prices of alternate vendors, you will never know if you are truly getting the best deal available. Check out the competition and use any information gathered to your advantage on your next purchase. Or, you may even find a new vendor that better fulfills your needs.
3. Can we benchmark our IT costs?
Being complacent with your vendor's terms and prices is a sure way to pay above fair market value for your IT purchases. Because there isn't a price list available for most IT products and services, it is up to the CIO to know current pricing standards and demand fair prices and transparent terms on all purchases.
4. Should we create a position for IT purchasing?
Over the last decade, IT purchases have become increasingly more complex and now require a unique skill set to be managed effectively. IT managers usually don't have the sourcing knowledge and purchasing doesn't have the IT knowledge. To solve this, many companies have started creating Vendor Management Offices (VMOs) and IT Controller roles to achieve optimal results in IT purchasing.
5. Does our contract include fixed-fee engagements?
Ideally, you should answer no to this question since fixed-fee engagements are really not fixed at all. In most cases, loop holes in your contract allow for overage charges and fees to be tacked on to the initial fixed fee. Negotiate the terms for your engagements based on time and materials if you want to avoid overpaying.
6. Will IT purchases support the organization's objectives?
IT investments can be extremely expensive and risky. Help minimize the financial risk and poor purchasing choices by making sure that IT managers are well aware of the needs and goals of all other departments. Aligning IT purchases with the objectives of the entire organization will ensure that the investment is a good decision.
About the Author:
Joseph B. Kappernick specializes in helping Fortune 500 companies save money. He recommends that you visit NPI to learn more about IT cost reduction
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