KEY POINTS TO REMEMBER | Cost Reduction Project


Step 1: Establish goals
  • Determine the cost reduction magnitude, timing of reductions necessary, areas the reduction must affect, and constraints relative to actions.
  • Re-align IT priorities as the business goals and priorities may have changed.
  • Communicate the cost reduction goals to the organization.
  • Short-term goals may require that you immediately take short-term actions and come back later for the information and analysis steps for more sustaining cost reduction measures.
Step 2: Obtain information
  • Obtain information on the budget and spending and information on assets and inventory.
  • Obtain or assemble IT information on the budget, business plan, strategic plan, project list, application inventory, hardware inventory, staff inventory, and the organization chart.
Step 3: Analyze
  • Consider taking an expense approach, investment approach, asset approach, or services approach.
  • Understand the cost drivers and reduction enablers.
  • Be careful when using benchmarking.
Step 4: Identify and prioritize actions
  • Review all areas of IT for cost reduction opportunities, including business applications, technical infrastructure, processes, and the organization.
  • Prioritize actions by identifying short-term, medium-term, and long-term cuts.
  • Identify the cost reductions anticipated from each action.
  • Communicate the plan.
Step 5: Execute
Step 6: Monitor and improve
  • Determine the success of the cost reduction efforts and any negative impacts.
  • Review leading indicators.
  • Continue to monitor and improve.

Identify Cost Reduction Possibilities


Review each area of IT for cost reduction opportunities. Include the following areas, each of which are covered within various chapters of this book to provide additional guidance and suggestions:
  • Business applications:
    • Application portfolio.
    • Software licenses.
    • Maintenance and support agreements.
    • Software implementations, custom application development, and other application options.
      Top Tip: Logical decisions based on facts

      "IT management must learn and understand the budgeting process for their organization. You must put the impact in business terms. Outline the pros and cons to any potential cuts and identify the risks. Work with the business to make logical decisions based on facts."
      —Bruce McIntosh
      Graco Inc.


  • Technical infrastructure:
    • Database environment.
    • Desktop environment.
    • Server environment.
    • Network environment.
    • Voice and data telecommunications environment.
  • IT processes:
    • Service delivery processes: service level agreement, availability management, capacity management, IT service continuity management, financial management, and security management.
    • Service support processes: service desk function, incident management, problem management, change management, configuration management, and release management.
    • Systems development processes: feasibility, requirements, design, develop/install/integrate, test, validation acceptance, and post-implementation review.
    • Manage resource processes: IT strategic planning, portfolio management and governance, project management, human resources management, data center operations management, facilities management, procurement and vendor management.
    • Manage business relationship processes: understand the business, market IT offerings, satisfaction management, and metrics management.
  • IT organization:
    • Organization structure, roles and responsibilities.
    • Salary planning, bonuses, benefits.
    • Headcount management.
    • Organizational alternatives, management of consultants.
  • Miscellaneous costs:
    • Copiers.
    • Printers.
    • Training.
    • Travel.