Blog post

Navigating Cost Optimization at a Midsize Enterprise

By Vivek Swaminathan | March 28, 2019 | 0 Comments

2019 has only just begun and midsized enterprises (MSEs) are already getting nervous.  60% of MSE CIOs projected their IT budgets would be flat or contract across 2019, according to Gartner’s IT budget benchmark.  Recession rumors and slowing global demand are only intensifying interest in cost optimization.

“I didn’t think we could manage costs any more aggressively than we were, and yet here we are again.  I guess this is the new normal.” – CIO at midsize retailer. 

Technology investment at MSEs also tends to be more expensive, since smaller organizations can’t exploit economies of scale as well as larger ones.  In 2018, midsize enterprises spent 4.5% of total revenues on tech compared with 3.5% at larger enterprises.  Under additional scrutiny from Finance, IT leaders worry they have no choice but to oblige by cutting funds from discretionary budgets, cancelling planned work or by simply leaving open headcount unfilled.

But these are not the only options available.  Cost optimization does not equal cost cutting.  Should your organization be up against cost pressure, IT leaders can (and should) rely on more nuanced responses instead.

  1. Know where your money is going. Why does IT cost so much?  A simple question leaves many IT Leaders scrambling for a straightforward answer.  With simple budgeting processes and categorization techniques, midsize enterprises can respond intelligently and transparently.  (Use the Ignition Guide to Creating the Annual Budget for IT to get started.)
  2. Tailor your CFO message. The CFO is under constant pressure to drive efficient growth, so understanding their perspective can help you better position what you need and provide context around where you can sacrifice. (Use the Point of View: CFO presentation template to improve conversations.)
  3. Keep relevant benchmarks handy. Going on gut-feel or a compelling pitch just isn’t going to cut it.  Using benchmarks from other midsize enterprises adds credibility to recommendations and supports your opinions. (Refer to the 2018 Performance Dashboard and compare your numbers with peers.)
  4. Tell your IT value story. It’s tempting to get buried in numbers and presentations and miss the opportunity to tell a good story.  Choose your story from the 10 Value Stories common across midsize IT organizations.

Taking a moment to stop and craft your cost optimization plan can make all the difference.  Access additional midsize enterprise guidance on cost optimization on Gartner.com or tap into our community of Midsize Enterprise Executive Partners to rethink cost optimization for your organization.  Can’t access links?  Talk to us about becoming a client.

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