11 Cost Optimisation Options for German CIOs to Consider in 2009

Publ. by www.redviking.se

Egham, UK, March 26, 2009

As German buyers slow their decision-making processes and IT investments, Gartner, Inc. has identified 11 options for German CIOs to optimise their IT investments in 2009.

“We expect IT services spending in Germany to slow down to € 33.8 billion total spend in 2009, with growth reducing from 4.4 per cent in 2008 to 2.6 per cent in 2009. German CIOs need to deliver immediate economic value through cost optimisation initiatives in 2009,” said Michael von Uechtritz, research director at Gartner, based in Dusseldorf.

These initiatives include options for IT services, business process improvement and IT technologies.

Three Options for IT Services:

1- Renegotiate Outsourcing of IT Services – Renegotiations often result in cost savings of as much as 20 per cent, according to Gartner. However, CIOs must understand that renegotiations involve concessions, such as less stringent service-level-agreements (SLAs) and that premium service levels will not have a bottom line impact, although lowering service levels and/or pricing can help achieve cost optimisation.

2- Increased use of Offshore Resources – In a recent Gartner user survey, 29 per cent of German buyers stated that they would never consider using offshore services as an option, much higher than the European average of 17 per cent. However, Gartner said that the value of increased use of offshore resources can go beyond cost optimisation by offloading core competencies and allowing German-based experts to concentrate on innovation and customers.

3- Save on IT Consulting Contracts – German CIOs should be considering different alternatives to get more value from IT consulting contracts, which, in turn will boost performance and impact the bottom line. For example, organisations can immediately optimise costs if they procure consulting services differently. Gartner estimates that organisations can optimise costs by 10 per cent, if they bundle outsourcing agreements, ease project refinancing, reduce financial risk, increase economic returns and increase competitive pressures on suppliers through shorter-term, rather than longer-term, commitments made by the consulting service provider.

Two Options for Business Process Improvement:

1- Finance and Accounting Business Process Outsourcing – Business process outsourcing (BPO) of finance and accounting (F&A) services represents a significant cost saving opportunity for business and IT buyers. Gartner estimates that around half of Western European buyers of F&A BPO services saved up to 20 per cent in costs, illustrating the value that CIOs in Germany could achieve through outsourcing these business processes.

2- HR BPO – Seventy-eight per cent of global buyers of HR BPO achieved up to 10 per cent cost savings.

Six Options for IT technologies:

1- Cloud Computing – Through cloud computing, German CIOs can quickly leverage highly scalable IT-based competencies and capabilities as a service. Cloud computing also offers CIOs the opportunity to optimise costs in server procurement, licensing and data centre energy supply.

2- Multicore Server – The integration of several processors with generally the same clock speed in a single server unit offers additional value. As such, German CIOs can rapidly change their IT performance approach from capacity-based cost calculations to a per-thread basis and shrink the application lifecycle.

3- User Interface – Although it is difficult to evaluate the economic advantages of introducing innovative user interface technologies, businesses will benefit from improved Web presence, social values and the cost advantages associated with improved efficiencies and lower support costs.

4- Virtualisation – German CIOs will find value from virtualisation as it delivers innovative IT infrastructures with enhanced flexibility and additional cost-saving opportunities in energy and facilities. It can also boost corporate social responsibility efforts through reduced CO2 emissions.

5- Communications and Mobility – German CIOs could optimise costs by investing in technologies that improve the efficiency of fixed and mobile communications technologies. For example, the introduction of thin client mobile applications for various types of mobile devices helps to make the mobile Web cost-effective. This will be the key business-to-employee and business-to-consumer technology in the future.

6- Open-Source Business Intelligence - German CIOs are advised to always subscribe to the fee-based service agreements to guarantee product support. Larger vendors have reasonable support structures, while some open-source BI projects are solely supported by the open-source community. Open-source BI delivers German CIOs an immediate cost advantage through optimised software licensing costs.

“Cost optimisation options are not expense-free and usually require an upfront investment to realise the economic benefits,” said Mr von Uechtritz. “Overall German CIOs should think long term, even when they plan tactical moves to optimise costs during the current downturn. Any tactical changes should strengthen an overall plan for long-term strategic business growth and improve market competitiveness so that the organisation emerges from recession even stronger.”

German Perspective: 11 Options to Optimize IT Costs in 2009.