Traditionally, IT cost management has traditionally been the sole responsibility of the CIO, mainly because IT was viewed as something used to support business strategies, not drive them. But in recent years, this view has changed as many CEOs, CFOs, and other stakeholders now understand the enormous value of IT as wells as how IT cost management can impact the business.
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 are our support options?
Paying too much for support and maintenance is all too common these days. Now is the time to evaluate your current agreements to make sure that you are not over or under supported. If you are not already using a third-party support provider, it is a good idea to consider your options - you may save as much as 50 percent over vendor prices.
2. Do we have to stay with the same vendors?
While sticking with a familiar vendor has its advantages, it is always a good idea to compare the prices and services of other vendors. A good working relationship is important, but not at the expense of your budget. Talking to the competition will also give you some extra leverage and possible discounts at your next negotiation.
3. Do we know what fair market pricing is?
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. Who should manage IT purchasing?
Many businesses are now realizing the need for both Vendor Management Offices (VMOs) and IT Controller positions to help optimize IT purchasing. These new roles are becoming more and more necessary because most IT managers don't possess the sourcing experience necessary and IT purchases are too complex for most purchasing departments. Ideal candidates have the required IT sourcing and purchasing knowledge to get the job done.
5. Do we have any fixed-fee engagements?
Avoid fixed-fee engagements at all costs. More than likely, you will be changed for additional fees and overages - especially when dealing with new IT projects that require a little extra time to learn. Opt for engagements that charge for service on a time and materials basis instead, so that you only pay for what you use.
6. Is our IT strategy aligned with the rest of the organization?
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 are our support options?
Paying too much for support and maintenance is all too common these days. Now is the time to evaluate your current agreements to make sure that you are not over or under supported. If you are not already using a third-party support provider, it is a good idea to consider your options - you may save as much as 50 percent over vendor prices.
2. Do we have to stay with the same vendors?
While sticking with a familiar vendor has its advantages, it is always a good idea to compare the prices and services of other vendors. A good working relationship is important, but not at the expense of your budget. Talking to the competition will also give you some extra leverage and possible discounts at your next negotiation.
3. Do we know what fair market pricing is?
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. Who should manage IT purchasing?
Many businesses are now realizing the need for both Vendor Management Offices (VMOs) and IT Controller positions to help optimize IT purchasing. These new roles are becoming more and more necessary because most IT managers don't possess the sourcing experience necessary and IT purchases are too complex for most purchasing departments. Ideal candidates have the required IT sourcing and purchasing knowledge to get the job done.
5. Do we have any fixed-fee engagements?
Avoid fixed-fee engagements at all costs. More than likely, you will be changed for additional fees and overages - especially when dealing with new IT projects that require a little extra time to learn. Opt for engagements that charge for service on a time and materials basis instead, so that you only pay for what you use.
6. Is our IT strategy aligned with the rest of the organization?
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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