Business leaders are scrambling to put spend back on the bottom line as low global economic growth and increasing inflation continues into 2023. CIOs and IT leaders have been no exception.
With the mass shift to hybrid working, robust and agile technological capabilities have never been more important for businesses, but this has come at a time when budgets are tight.
A recent report by research company Gartner found that in order to adapt to this reality, CIOs are changing their spend strategies to focus on alignment, proactive anticipation, and adaptability. These ‘value frameworks’ allow for coordinated management of finite resources and investments.
A recent report by research company Gartner found that in order to adapt to this reality, CIOs are changing their spend strategies to focus on alignment, proactive anticipation, and adaptability. These ‘value frameworks’ allow for coordinated management of finite resources and investments.
So as CIOs reconsider their cost management, what can these value frameworks offer CIOs and how can they be used to deliver long-term savings?
What is a value framework?
CIOs have traditionally opted for two short-term approaches to manage spend: cost optimization and demand management.
In IT, cost-optimization involves the standardization or rationalization of the Tech physical and digital assets. Demand management on the other hand works to utilize planning technology to forecast, design and manage demand for products and services.
Value frameworks provide a long-term coordinated approach by allowing CIOs and their teams to take a sophisticated view of how they employ resources and where best to invest. This allows CIOs to align resources flowing through their systems, empowering leaders to make more measured financial decisions.
Implementing a value framework
Best-in-class enterprises not only employ cost optimization levers, but they execute them in a value framework. Ultimately these frameworks should be adaptable and there are four primary considerations for IT leaders:
Alignment – The framework must focus on building on or deepening relationships between IT, the base business, finance, and procurement to ensure greater coordination and alignment across departments.
Standardization – When standardizing products and services, a collective understanding of nomenclature and acronyms must be asserted. This ensures that best-in-class portfolio management can be executed (all projects are able to employ the same measurements in a fast-moving business environment). Base business should ensure these metrics are able to quantify the bottom-line impact and this should be coordinated effort with Tech and finance. Procurement functions must guarantee contracts are written in line with value metrics requirements, enabling standardized scoring within the context of the value framework.
Consistency – When deploying the framework, it must be consistently applied to all business projects moving forward, enabling a connected and coordinated strategy across the whole organization.
Review – Projects which have been integrated into the framework should be measured in the previously mentioned metrics and tracked against for variance (both + and -) and comparisons drawn across the complete portfolio to ensure and evidence business satisfaction.
Organizations should not aim for the sky when instigating a value framework – as with any change management program, a strong foundation is required followed by incremental step changes in the framework to keep improving.
When should IT leaders use a value framework?
Value frameworks are often seen as an alternative to cost optimization strategies, but both solutions have their merits and appropriate uses.
Cost optimization is viewed as more of a quick win that can yield results in uncertain times, while value frameworks offer a more overarching approach that will provide improved bottom-line results in the long term.
I would assert that cost optimization is a lever that sits under the broader strategy of creating a Value Framework.
Value Frameworks articulate, the how and the why of overall value created for the business, including the overall governance, metrics, and execution. Cost optimization and demand management are two of the short-term levers (note there are multiple short and long-term levers that can be exercised).
CIOs of today should be considering whether their priorities are short-term savings or far-reaching business transformation. The market would suggest that companies are utilizing a mixture of both short and long-term levers, the key is the balance between the two to maximize value. Ultimately, organizations that embrace value frameworks will reap the benefits and see continued stronger bottom-line results in the long term.
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