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March 21, 2024

What factors should be driving CIO IT rationalisation priorities?

With enterprises under growing pressure to get more from their IT infrastructure for less, tech leaders must look beyond merely cutting costs when it comes to defining priorities and harnessing opportunities.

By Rupert Colbourne

The optimisation of an organisation’s IT infrastructure – both software and hardware – can be complex and time-consuming. But, given the pace at which technology is advancing, IT rationalisation is growing significantly in importance and urgency.

This will impose heavy costs upon organisations, not just financially, but from an efficiency standpoint as well. Today’s transformative systems can quickly become tomorrow’s legacy platforms.

IT rationalisation
IT rationalisation is growing significantly in priority and urgency, but must be about more than cost. (Image by Shutterstock)

Closely monitoring and measuring the performance and cost benefits of IT investments allows organisations to plan and anticipate any changes they need to make.  It’s a function that many organisations are aggressively pursuing as they look for ways to help reduce costs in today’s challenging economic environment.

However, while reducing costs is a key objective of IT rationalisation, too much focus on cost reduction as a driver for this exercise can lead to missed opportunities.

Investing in the future

Typically led by an organisation’s CIO, IT rationalisation can have an impact way beyond the financial. An evaluation of an organisation’s IT infrastructure in the context of new technological developments often leads to opportunity costs. Persevering with older versions of software, for instance, might prevent an organisation from making use of new features and efficiencies that later iterations boast. And this can happen even if an organisation does have a broad-brush policy of actively updating and investing in its software. Simple inertia can mean that a business using Microsoft 365 may still have certain teams or locations using Office 2016, and therefore missing out on the full available functionality.

A second opportunity cost comes because of simple budgeting. Like every function of a business, IT departments have limited budgets. But they face unique pressures to make continuous investments. By necessity, any organisation that wants to remain on the cutting edge of technology will continually add to their tech stack. Today, however, CIOs and CTOs are being tasked to make their investments stretch further and prioritise reduced spend.

The impact of this can be hugely significant if key opportunities are missed. Consider the example of a retailer who, in 2005, chose not to – or was unable to – invest in e-commerce solutions; the opportunity cost there could be massive.

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Identifying priorities and redundancies

Fortunately, rationalisation can help reduce these opportunity costs – just as it can financial ones. By identifying which critical applications, data, and systems need to be rationalised, IT departments are able to prioritise their efforts and define the technical and business changes that must be made to capitalise on those golden opportunities. Then, by identifying and removing those elements that are redundant, risky, misaligned, or provide low business value, an organisation can further reduce opportunity costs. 

This also has the benefit of improving efficiency. After all, the complexity of managing hundreds of applications can slow down the work of an IT department. According to McKinsey research, 40% of IT balance sheets are dedicated to redressing existing technology issues – known as ‘tech debt’. Such a heavy burden in terms of time and finances shouldn’t be tolerated. Rationalising applications and removing any that are unnecessary or surplus to requirement is the best way to remedy the issue.

Opportunities through consolidation

IT rationalisation holds broader benefits that may appear somewhat incidental at a first glance but can be very valuable.

Consolidation of data sources and workflows is a prime example. According to Zylo’s most recent SaaS management index, the average small business runs 172 IT applications, while large enterprises run an average of 664. It can be hugely challenging to identify which of an organisation’s hundreds of applications should be targeted for rationalisation. Application data can often be buried deep within ancient Excel spreadsheets or Word documents, and particular tools and techniques will be required to make sense of that data effectively. But once this data is consolidated and rationalised, organisations are much better placed to understand their data sources, flows and dependencies to get a hold of the data privacy and security dimension to everything they do. 

 A timely undertaking

Organisations are increasingly maintaining a technological edge by taking advantage of advancements in cloud technologies, edge computing and – most recently – generative AI. But it’s easy for an organisation to become overburdened – and financially over-extended – by its IT investments.

Crucially, IT rationalisation can help reduce unnecessary costs across an organisation’s IT estate.  But its benefits extend beyond that. It also improves productivity and technology utilisation and eliminates the use of high-risk or non-compliant technologies. Indeed, without it, businesses would not be able to scale or operate efficiently. IT rationalisation is fundamentally informed by overarching business strategy and goals. That’s important, and will only become more so, as all organisations move to being data-driven and strive for positive results from the adoption of new technologies.

It’s vital, therefore, to look past cost savings and consider the additional opportunities that IT rationalisation represents. It may not be easy, but it is arguably one of the most important initiatives a modern organisation can embark on.

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