Today enterprises waste more money on IT than ever before and it’s not as if the money is going into growing and transforming the business. What, then, is pushing costs into these stratospheric levels?
Most of the money, an average 66% according to Gartner, goes into keeping the lights on and more than 6% is wasted because of mediocre maturity levels. With businesses and IT under increasing pressure to improve portfolio effectiveness and reduce IT costs, it’s essential that businesses find a way to mature their IT portfolio management so they’re able to optimize every dollar invested in IT.
During the recent Gartner PPM & IT Governance Summit in Maryland, more than 90 of our booth visitors completed a brief survey which provides a gauge as to how mature they are with regard to Digitalized IT Portfolio Management. The visitors work for great companies with a total $1.5 Trillion in revenue and $51 Billion in IT.
Based on the average level of their IT Portfolio Management maturity, 2.32 on a four point scale (Click here to read more about the survey and the results in my previous blog), I did a quick calculation and discovered that collectively these companies have an opportunity to digitalize their IT investment and recover $3.1 billion; and the cost of postponing digitalization for these companies is more than$260 million per month!
What is the cost savings potential for company?
To provide perspective, I used a total IT budget of $121 million which is the median IT budget for those organizations participating in the survey. IT costs are often viewed as a black box largely because all IT expenses are perceived as one bucket. Without the right segmentation of IT costs, the business and IT will try to reduce all costs instead of trying to optimize separately the Run-the-Business and Change-the-Business portfolios. The two types of spend are different, they have different risks and should be separated out for a more authentic look at impacts.
We were able to determine opportunities for savings due to the implementation of a digitalized IT investment system.
- “Run-the-Business” savings could amount to $4 Million out of an $80 Million budget.
- “Change-the-Business” savings could amount to $3 Million out of $41 Million budget.
- Total IT savings could amount to $7 Million out of $121 Million budget.
So what does this analysis really reveal?
This analysis is a wake-up call. While businesses don’t often understand the cost of inefficient portfolios, companies can take the maturity scores and use them to determine how much room they have for improvement – how much could the business actually save? Perhaps more importantly, what is the cost to the business if no action is taken? This information will help the business decide whether or to what extent it should invest in digitalizing its IT investment processes. In the case above, the cost of postponement or taking no action toward digitalization is more than $600,000 per month.
Is there a better way?
This analysis illuminates IT savings opportunities but it also identifies areas where change is needed so the business can explore implementing processes and software tools to help the business mature. Businesses should evaluate where they are currently and look at the steps they need to take, immediately or in a phased approach, to begin realizing benefits and savings.
Whether companies will wake up and look for opportunities to improve their IT investments systems remains to be seen; if they don’t, they will simply pay the price through a higher IT expense and lower yields.
Curious about the potential savings from digitalization of your IT investment process, or how your IT effectiveness differs from your peers overall? UMT360, which has developed a leading Enterprise Portfolio Management solution that digitalizes investment planning and controls across portfolios, can give you a personal analysis to benchmark and identify opportunities your company has for increasing IT maturity and optimizing your IT spend. Contact our team today or visit our website to learn more about UMT360’s Strategic Portfolio Management solutions.