Infrastructure runs on insight. As Digital Age business has come to rely more on technology, the stakes are especially high for IT leaders. From guarding the organization against cyber attacks to driving innovation through the implementation of new technologies, CIOs are tasked with managing a wide range of critical business responsibilities. Digital transformation is chief among these responsibilities, but how can anyone determine what to change without an understanding of what they have? We believe the best place to start when revitalizing your IT environment is with a clear picture of your current state; its true costs, complete inventory, and a map of its operations and expenditures.
Should you spend more on maintenance of a legacy system or invest in a replacement process? How many staff members should be assigned to research, test, and implement a new application or service? Recent acquisitions bring new cybersecurity threats, but should a third-party specialist be brought in to mediate the transition? The path to answering these questions isn't easy, but there's only one way to do so with any degree of confidence: by gaining the best-informed perspective you can on your IT environment through a cost and operation analysis.
What's the Benefit?
From legacy system maintenance and complexity to resource mismanagement and waste there are numerous forces impeding the innovation on which a business thrives. According to a survey from Capita and Citrix of 200 CIOs and senior IT decision makers, "84% of organizations say an inability to roll out new services and applications to their workforce quickly is affecting business competitiveness."
Planning for the future is difficult enough without the clear picture a total cost and operation analysis can give you; trying to stay competitive is impossible. Although the analysis can be challenging it can deliver a wide breadth of knowledge:
- Budget Reclamation – According to Gartner, nearly 50% of an average IT budget was spent on infrastructure and operations in 2017 and 2018. You may have a handle on the obvious expenditures and logistics of your IT environment, but what about the unseen costs and connections? How much does it cost you per year on training versus hiring the expertise you need in the form of new employees or third-party contractors? How much does it cost to maintain a legacy system only a handful of employees use in a limited capacity? It's easier to argue for additional funds when you can account for all current IT spending.
- Operational Visibility – Day-to-day operations might comprise a large percentage of your environment's activity, but what infrastructure changes could improve efficiency and performance? When so much of your time is spent keeping the lights on, when does it become more beneficial to look for new solutions to old problems? Less conventional operational metrics—such as true incident resolution costs, interdepartmental application dependency numbers, and legacy systems' frequency of use—will give you a better idea of how to streamline IT activities and identify opportunities for infrastructure improvements.
- Resource Allocation – How do you determine the best use of your resources without a big picture perspective on your IT environment? When it comes to complex activities like cybersecurity, what criteria are used to decide between employee training and new hiring? With how few IT employees can your enterprise survive a cyber attack? From people to equipment, you're better able to allocate or request resources if you understand where skill or coverage gaps are and what you need to fill them.
- Business Insight – Businesses today depend on their technology to differentiate themselves in the marketplace. How can an IT organization help their collaborators determine which major initiatives are achieving the best results without comprehensive cost and operational metrics? By quantifying the efficacy of IT operations that might remain "invisible" to other segments of the organization, you're better equipped to prove their business value, both in the short and long terms.
How to Discover What You Spend?
Undergoing this IT environment analysis is a complex undertaking. Given the interconnectedness of systems it can be difficult to determine where to start, but it helps to have a plan as detailed below. Not every analysis will follow the same path, but we consider these steps to be integral building blocks of the process.
- Determine Objectives – Identify the business objectives you hope to achieve through the IT environment cost and operation analysis. For most the benefits we identify above are reasons enough, but it's important for everyone involved in the project to understand that the ultimate goal is to link IT operations to business outcomes. Metrics that demonstrate this relationship are key to providing the insight needed to assist in business planning, identify future opportunities, and develop a budget that helps support those activities.
- Build a Map – Develop a comprehensive map of the touchpoints and activities that depend on the IT infrastructure. What business services are the IT team providing on a daily, monthly, annual basis? Collect and catalog the business outcomes they help deliver. Remember that IT spending is not limited only to traditional technical infrastructure. For instance: a subscription to a project management software cloud such as Slack or Microsoft Office 365 might be used primarily by product development, but IT resources are still involved in its implementation.
- Identify Components – Break down each of the operations and activities according to the specific technologies used to perform them. It's important to note which technologies are performing multiple functions across several applications, including the IT infrastructure components that might at first seem "invisible," including tangible things like power, climate control, storage space, as well as less well-defined processes, such as employee hiring, training, and RFP processes. By creating a comprehensive inventory you can better understand the importance or irrelevance of your IT technologies and systems.
- Assign Tangible Costs – Assign costs to each of your IT infrastructure's components. What are the up-front costs for each element of your environment per month or per year? Are these costs one-time expenses or recurring? Do you already have stock on hand to replace elements if they fail or are decommissioned? A table of expenses isn't the most exciting piece of the puzzle, but it's integral to understanding where your budget goes and what you might need.
- Assign Intangible Costs – Perhaps the most difficult and time-consuming step of all: assigning costs to the intangible elements that influence your IT environment's behavior and performance. If your product or service experiences unplanned outages, what does the downtime cost in the way of business productivity and customer satisfaction? If a mission critical application is unable to deliver the performance your employees need, how much time (and money) do they waste attempting to make it work? If you're training an employee to tackle a problem that requires more than a single individual's attention, at what point do you make a new hire or bring in a partner? While time's intangible nature makes it easy to overlook, every minute wasted is an IT budget dollar that could be better spent.
- Determine Conclusions – The data you collect throughout this process is useful, but it's only a means to an end. The true benefit of a total cost and operational analysis is the business insight it provides. What have you learned with regards to your objectives? Look for patterns, look for opportunities to ask questions. For instance, the more entrenched a legacy system is the more difficult it becomes to extricate it from your environment; when looking for a replacement application, how can you best use the knowledge you've uncovered to calculate the true cost to your IT organization over time?
What Challenges Will You Face?
The process of creating a cost and operational analysis of your IT infrastructure is not without challenges. Most significant among these impediments? Although the goal is to understand how best to use your time and resources, doing this research takes time and resources. As the digital world becomes increasingly complex understaffed and underfunded IT departments might be unwilling to spend energy on a project that doesn't immediately impact the bottom line.
Another impediment: Every one of the steps described will require assistance from individuals who may not have a vested interest in providing the information you need. Whether out of concern for their job, a fear of responsibility, or a sense of personal attachment to the IT apparatus, the process can become emotionally charged for some participants. And even if the cost and operation analysis is a success, there can be challenges in getting higher level stakeholders to appreciate the conclusions drawn or convincing them corrective action is warranted. IT leaders must be prepared to defend the project and use its findings to demonstrate not just potential benefits to the IT organization, but the business as a whole.
Finally, this cost and operation analysis should be about more than highlighting a single point in time. Too often enterprises do a deep dive on their costs and systems, only to call it a day and set the results aside. But to be used most effectively in guiding IT investment and driving business outcomes, this process should become less an exceptional event and more of a standard operating procedure.
Know Your Path
Without knowing where you are, it's impossible to determine how to get your company's IT infrastructure to where it needs to be to support the business. An understanding of your IT environment's true costs and operations can mean the difference between a nightmarish budget debate and the simple fulfillment of a streamlined strategy. By looking at these characteristics over time IT leaders will be best equipped to identify trends and adjust their approach accordingly.
Will a total cost and operational analysis solve your IT infrastructure problems overnight? No. Is it the best first step toward improving your environment's performance and reliability? Yes.
Regardless of whether you have IT staff in house or your organization contracts with a technology partner, creating a reliable asset management and cost tabulation strategy will go a long way toward reducing the tension between infrastructure investment and management. The process may prove difficult and uncover information some colleagues may consider undesirable, but a complete picture of your IT environment will prove an invaluable advantage on the path toward future success.
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