ICT Cost Transparency / Cost Reduction
A medium sized multi-national organisation based in Europe wanted to know what financial efficiencies could be realised by standardising and sharing more ICT infrastructure and IT services. The intention was to realise cost savings whilst, at the same time simplifying the infrastructure.
The starting point for the engagement was to establish a baseline cost for each primary ICT service; for example: networks, data centres, desktop, email, applications and service centres. Once costs were established then it would then be possible both to identify best practice around the group and make accurate financial projections for alternative service models.
The Morgan Hill Financial Model was deployed in six of the largest operating companies within four weeks. The model allowed the collection of ICT operating costs from financial systems and the collection of summary detail of ICT services – a summary service catalogue. The model was then used to allocate cost data to the items in the service catalogue. This process was conducted with representatives from both the IT and finance communities. The result was an agreed, costed baseline for each service in each country. The fundamental questions of what have we got and what does it really cost had been answered.
Once the baseline costs were known it was straight forward to propose changes that achieved the dual objectives of cost reduction and infrastructure simplification. Technical strategies included: selective outsourcing, data centre consolidation, cloud services, WAN consolidation and greater use of encrypted public internet services. The financial outcome was a 12% reduction in ICT opex costs from the established baseline.