Kristin R. MoyerWhile there continues to be a lot of uncertainty in the global financial community, one thing is clear: IT budgets are coming under increased pressure and scrutiny. CIOs can pursue cost containment in many different ways across the categories of their IT portfolio. Here are three strategies to contain costs using the Gartner investment framework:
- Strategy 1: Reduce all costs and leave ratios the same – This is a “drain the swamp” approach, in which all IT budget costs are reduced, and run-, grow- and transform-the-business spending ratios remain the same. Banks that are fighting to remain liquid must take this approach.
- Strategy 2: Reduce inefficiencies from run-the-business spending – This option means that CIOs must identify cost-cutting opportunities that reduce the run-the business aspect of the IT budget. This will enable the firm to invest more in grow- and transform-the-business initiatives.
- Strategy 3: Reduce inefficiencies from grow- and transform-the-business spending – With this strategy, CIOs redefine the cost structure for grow- and transform-the-business spending. The underlying assumption of this strategy is that the future will include more hardware – as well as software, IT services and automation – and less labor. Run-the-business activity is hardware-intensive while grow- and transform-the-business activities are labor- and time intensive.
I’m in the Nordics this week, where banks have not been as impacted by the sub-prime crisis as those in the US and parts of Europe. Yet, each bank that I’ve spoken with views additional cost containment as a strategic IT imperative.
Banks around the world need to evaluate each of these strategies for fit with the business strategy and objectives of their firm. In other words, no single strategy is best for all banks.
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