Identifying and

Prioritizing Cost Overview

Optimization This document previews Gartner’s Ignition Guide to

Identifying and Prioritizing Cost Optimization
Opportunities for IT.

Opportunities for IT
Ignition Guide Preview

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Roadmap

Appendix: List of
Topic Overview and Implementation
Available Ignition
Implementation Advice Roadmap and Tools
Guides

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What is Cost Optimization?
Cost optimization is a business-focused approach that is intended to drive spending and cost reduction, based on
the principle of maximizing business value.

EVP Cost Pressures

Approaches Considered by Organizations to Overcome

Emergency Cost Improving Cost Optimizing Optimizing Enabling New, Digital

Reduction Under Efficiency of IT Business Demand Technology Spending Business Models that
Financial Distress Operations for IT Services Across the Enterprise Maximize Long-Term
Value
Sample Cost • Freeze application • Centralize helpdesks • Rationalize and • Consolidate vendors • Reimagine business
Optimization or development worldwide standardize the and rationalize service delivery with
Cost Cutting • Let all non-mission- • Consolidate data applications portfolio contracts across the technology. (e.g.,
Initiatives critical software centers • Implement a enterprise improve customer
licenses expire chargeback or • Implement zero-based experience, build new
show-back model budgeting to right-size payment models)
technology spending in
business capabilities
that don’t yield
competitive advantage

Reactive cost cutting Cost optimization; focus of this Ignition Guide Transformation initiatives where cost
optimization is not the primary focus

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Implementation Pitfalls and Keys to Success
Pitfalls Keys to Success
Disproportionally Focusing on Cost Cutting: CIOs disproportionally Use Business Value Maximization as the Guiding Principle for Cost
focus on surfacing opportunities for cost cutting rather than opportunities Optimization Efforts: Where possible, build business and IT leader
to optimize costs and maximize business value, leading to cost consensus on prioritizing initiatives that maximize business value over
reductions that can’t be sustained over the medium-long term. initiatives that target short-term cost reductions. For example, many
CIOs encourage additional investments as part of their cost
optimization efforts, if significant financial benefits will then accrue in the
medium-long term.

Taking a Siloed and Narrow View of Technology Spending: CIOs Build an Enterprise View of Technology Spending: Create a wider
ignore business-led IT spending and manage IT budgets using a narrow enterprise view of technology spending by including business-led
general-ledger-driven view of spending, which leads to a superficial technology spending; then, maintain multiple views of this spending
understanding of technology spend across the enterprise. such as a technology view, business services/application view and
investments view. This transparency allows for effective coordination in
identifying cost optimization opportunities and helps uncover scalable
opportunities rather than one-off digital solutions.

Viewing Cost Optimization as a Point-in-Time Activity: CIOs often Embed Cost Optimization as a Continuous Discipline in the IT
view cost optimization initiatives as projects with a start and end date, Organization: Create a culture of continuous cost optimization through
neglecting to demonstrate and gain buy-in toward a long-term vision of tactics, such as rewarding cost optimization ideas from IT staff, and
continually optimizing costs and maximizing business value. including cost optimization metrics in functional dashboards, employee
MBOs and portfolio prioritization criteria.

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Roadmap

Implementation Appendix: List of

Topic Overview and
Roadmap and Tools Available Ignition
Implementation Advice
Guides

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Implementation Roadmap
View the steps involved in identifying and prioritizing cost optimization opportunities.
Gartner’s Ignition Guide provides guidance and tools for each of the four steps.

Step 1: Analyze IT Step 2: Identify Step 3: Prioritize Cost Step 4: Create Plans to
and Enterprise Cost Optimization Optimization Implement and Monitor
Technology Costs Opportunities Opportunities Cost Optimization
Initiatives

Develop a Work with enterprise Select cost optimization Plan the implementation
comprehensive view of leaders and select IT opportunities to and set a review
technology spending staff to surface cost implement based on the cadence for each cost
across the enterprise. optimization expected benefits and optimization initiative.
opportunities based on costs.
your organizational
context.

View slides 6 - 9 for information on tasks and tools available within each of these steps

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Analyze IT and Enterprise Technology Costs

View task-level guidance and tools available to help you analyze IT and enterprise
technology costs.

1. Build multiple views of technology spending.

2. Reflect on current spending in light of business and IT strategy.

Advice from Us
Use the following starter questions to reflect on your current enterprise technology spending:

• Which are our commodity capabilities — such as policy administration — that offer no competitive advantage? To what extent can
we reduce operating costs without significantly affecting service levels?
• Which capabilities provide us competitive advantage (e.g., self-service claims fulfillment for an insurance company)? How can
we maximize business value while optimizing costs for these capabilities?
• Based on our business and IT strategy, where should we allocate disproportional spend?
• What are the possible reasons for significant variation of our costs from industry benchmarks?
• Does our spending allocation to Run/Grow/Transform activities align with our overall business strategy and roadmap?

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Identify Cost Optimization Opportunities
View task-level guidance and tools available to help you identify cost optimization opportunities.
1. Define cost optimization opportunity evaluation criteria.

2. Create working group(s) to identify cost optimization

opportunities.

3. Build team consensus and commitment on the need for IT

cost optimization.

4. Provide guidance to working groups on how they can

identify cost optimization opportunities.

Guide to Identify Cost Optimization Opportunities (.ppt)

)

This tool helps identify and evaluate cost optimization opportunities

that align to the business strategy.

5. Encourage IT staff to share cost optimization ideas.

6. Solicit cost optimization opportunity proposals from working

groups.

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Prioritize Cost Optimization Opportunities

View task-level guidance and tools available to help you prioritize cost optimization
opportunities.
Graphic: Reflection Questions to Surface Dependencies
1. Assess cost optimization opportunities.

2. Validate cost optimization opportunities

by surfacing and addressing
dependencies, redundancies or
sequencing concerns

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Create plans to implement and monitor cost
optimization initiatives
View task-level guidance and tools available to help you create plans to implement and
monitor cost optimization initiatives.
Graphic: Illustrative Implementation Plan for a Cost Optimization
Initiative to Consolidate Data Centers

1. Create implementation plans for each cost optimization

initiative.

2. Set a cadence to review the implementation progress for

each cost optimization initiative.

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Roadmap

Implementation Appendix: List of

Topic Overview and
Roadmap and Tools Available Ignition
Implementation Advice
Guides

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What are Ignition Guides?
Ignition Guides

Gartner's intuitive, step-by-step playbooks help

your organization get key projects done quickly.
Like our best practice insights, these guides are
aligned with our clients’ most important projects,
and the logical structure enables teams to get
started quickly and execute with minimal oversight.

Featured Ignition Guide:

Ignition Guide to Creating a Strategic IT
Workforce Plan
This guide will help you:
• Identify talent needs to meet strategic
objectives,
• Establish a strategic workforce plan
encompassing recruitment, development,
redeployment, sourcing, and location-based
strategies, and
• Secure buy-in from cross-functional
stakeholders on the workforce plan.

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What are Ignition Guides?
1 2
Clarify the key steps you will need to take. Learn the pitfalls to avoid and keys to success.
Understand how to plan for, execute, and monitor this project for Review the “Plan” section to gain insight into factors that can hinder or
ongoing success. help your progress.

3 4
Get detailed guidance on how to execute. Save time and effort through our resources.
Access any step to view the underlying tasks and related resources to Implement tasks quickly using our proven tools and templates.
help you execute.

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Available Ignition Guides
Ignition Guides for CIOs and IT Leaders

IT Strategic Planning IT Talent and Culture

• Communicating IT Strategy to Employees • Creating and Communicating an EVP for Technology Talent
• Strategic Planning for IT • Developing or Updating Your IT Job Family Model
• Documenting Strategic Assumptions • Supporting Employees in Individual Development Planning
• Creating a Business Capability Model • Developing Employees Through Stretch Assignments
• Creating a Team Engagement Plan
Organizational Design and Operating Model • Preparing and Conducting Performance Review Discussions
• Creating a Strategic IT Workforce Plan
• Launching an IT Product Line
• Creating or Updating Your IT Competency Model
• Defining Internal End-to-End IT Services
• Delivering Compelling Presentations
• Handoff Mapping for IT
• Onboarding New Employees for Managers
• Creating an IT Shared Services Strategy
Transformation
Sourcing and Vendor Management
• Creating a Change Management Plan for IT
• Creating a Request for Proposal for IT
• Creating an M&A IT Integration Plan
• Selecting Vendors for IT
• Writing Effective Messages to Communicate Change
• Developing Vendor Contracts for IT
• Running Effective Vendor Negotiations for IT
• Creating a Vendor Onboarding Plan Office of the CIO
• Vendor Performance Management for IT • Creating the Annual Budget for IT
• Creating an Investment Business Case
• Creating a Scorecard for IT

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Available Ignition Guides
Ignition Guides for Application Leaders Ignition Guides for Enterprise Architects and
• Onboarding Agile Product Owners Technology Innovation Leaders
• Creating Agile Communities of Practice • Building Architecture Communities of Practice
• Writing and Managing User Stories • Creating a Marketing Plan for Enterprise Architecture
• Designing Career Paths • Building an Architectural-Thinking Training Program for Non-
• Improving Managers’ Coaching Effectiveness Architects
• Capturing Requirements • Designing and Managing EA Activities as Products
• Conducting Scenario Planning
• Building a Customer Experience Journey Map
Ignition Guides for Information Security Leaders • Creating a Functional Health Dashboard for the Head of EA
• • Creating an Effective Architecture Review Process
Creating Security User Stories
• Drafting Information Risk Appetite Statements
• Building an Insider Threat Management Program
• Creating a Functional Health Dashboard for Information
Security
• Building a Cyber Crisis Testing Program
• Data Classification
• Developing a Security Incident Response Plan

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Available Ignition Guides
Ignition Guides for Infrastructure Leaders Ignition Guides for PMO Leaders
• Creating Infrastructure Scorecards • Establishing a Center of Excellence (COE)
• Managing a DevOps Toolchain • Resource Capacity Planning
• Designing Infrastructure Career Paths for Cross-Domain • Selecting Portfolio Prioritization Criteria
Exposure • Creating a Project Management Community of Practice
• Creating and Communicating a DevOps Strategy • Conducting Portfolio Review Discussions
• Creating a Data Center Migration Plan • Creating a Project Benefits Tracking Process
• Building an Infrastructure Service Catalog for Internal IT • Building a Project Sponsor Training Program
Users • Establishing and Conducting Project Risk Assessments
• Scanning and Evaluating Emerging Technologies
• Creating a System Refresh/Retirement Plan

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