Manage 8 disruptive forces for cost optimization, says Gartner

by CXOtoday News Desk    Aug 08, 2013

disruptive tech

IT cost optimization is not just about cutting costs. It is about managing the IT portfolio proactively to maximize value. Cost optimization has become even more critical today with the increased adoption of emerging technologies and practices, according to research firm Gartner. Alexa Bona, vice president and analyst at Gartner stated 8 disruptive forces that can have a strong impact on CIOs and IT leaders and if not managed proactively, these could lead to sudden increases in IT asset costs.

No 1. The Internet of Things: This is the network of physical objects that contain technology to sense and communicate or interact with their internal state or the external environment. As ‘things’ such as consumer items, vending machines, automobiles, city infrastructure and enterprise assets become connected to the Internet, new experiences, operating efficiencies and business models can be created. Bona says, with numerous such devices becoming connected to traditional software, licensing models with device-based fees or indirect fees will result in a licensing cost explosion and this is a signal of caution for the IT leaders.

No 2. Maintenance fees: Software vendors are increasing their maintenance fees steadily, making it difficult for IT managers to reduce, even when the software is not in use. To deal with these changes, Bona recommends companies must improve their demand management skills, avoid purchasing licenses that they do not require and negotiate price protection for maintenance payments.

No 3. Software audits: companies need to be audit-ready. A Gartner survey conducted in the fourth quarter of 2012 found that 63 percent of the respondents had been audited at least once in the prior 12 months. CIOs must be serious on the growing intensity of audits in order to enable cost optimization.

No 4. Cloud computing: With increased adoption of cloud computing, IT leaders should understand and devise accurate cost models in comparison to traditional services and explain the comparative benefits and risks. They need to manage the bypass risk, understand the hidden costs and increased risks of cloud models, develop more robust demand and risk management methods, and negotiate beneficial terms in today’s immature cloud contracts, says Bona.

No 5. Mobile and app stores: IT leaders should be equipped to deal with multiple form factors, platforms or operating systems from different vendors as consumer priorities are changing from before and more importantly software vendors are changing their licensing programs to charge for new types of mobile device. Therefore, IT leaders should have an understanding on compliance-tracking, the related costs of employee-owned devices, and the various consumer apps being brought into their organizations. For some, enterprise app stores may help optimize mobile asset costs and management.

No 6. Virtualization: IT managers are still finding it difficult to reduce software costs in virtualized environments, and are struggling to manage compliance with complex and changing virtualization contract clauses. This is particularly true for desktop virtualization, which is often one of the mechanisms used to facilitate bring your own device (BYOD) strategies.

No 7. BYOD schemes: Despite the promise of reduced hardware costs, BYOD is actually costing enterprises more money in terms of wireless infrastructure upgrades, support costs, mobile device management spending, and increased security costs. In such a scenario, it is important forIT managers to have a strong BYOD strategy that can help them secure their enterprise.

No 8. Big data: As more and more information is collected and analyzed to improve competitive advantage, we will see requirements for even larger databases and more storage. CIOs will be challenged to optimize costs because of the core-based licensing metrics by which much of this software is licensed. According to Bona IT they may have to start sourcing data and defining and negotiating new business service-level metrics for information services in relation to integrity and quality.