In the Baseline article, “IT Spending Meets C-Suite Expectations” Ernst & Young Advisory practice lead, Leslie Blair, outlines the process of IT Cost Optimization and the need for good cost transparency as a starting point.

 To understand how IT supports their businesses, executives need answers to the following questions

• Do our IT projects reflect the goals and objectives of our enterprise?
• Are IT programs and project sponsors held accountable for the success of the programs?
• Is there a way to reduce IT costs without negatively affecting our operations?
• Are we realizing the value we expected from our information technology investments?
• What actions can we take to better predict and control our IT expenditures?
The answers to all these questions can be found by using a process commonly called “IT cost optimization.” This process can take many forms, but we believe the most significant and sustainable results are achieved when a strategic, data-centric assessment of an organization’s IT function is performed to uncover the roots of the IT spend. The result provides a transparent view of historic and current IT costs, and identifies practical and attainable ways to optimize it.
There are three distinct phases in IT cost optimization.
Phase One: Identify and Diagnose. Many companies do not understand the full extent of their IT costs, nor are the costs organized in a way that supports root-cause and comparative analyses. Phase One establishes the objectives of IT cost optimization, and identifies and categorizes all IT costs. Using a bottom-up approach, the organization inventories its IT spend and its drivers in the context of industry-leading practices and benchmarks.
Phase Two: Design and Deliver. Once Phase One findings have been discussed with business and IT management, areas for improvement are confirmed and the cost-optimization initiatives are understood, enterprises can begin Phase Two—the efforts to optimize IT spend. In Phase Two, optimization projects are formally approved, funded, scheduled and implemented.
Phase Three: Sustain Benefits. In Phase Three, ongoing progress reports and updates to senior management keep the cost-optimization projects focused on meeting their goals. Performance monitoring and a focus on continuous improvement increase the chances that the program will yield its expected results.

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