Three-Year Roadmap for IT Cost Optimization

Published: 28 March 2018 ID: G00350709

Analyst(s): James Anderson, Cesar Lozada

CIOs are often under continuing pressure to cut costs or deliver more with
fewer resources. CIOs can use the concept of this roadmap as a
communication device to socialize and gain buy-in from enterprise partners
for evolving the enterprise's IT cost optimization initiatives.

Key Findings
■ CIOs understand that cost optimization initiatives are important for the efficient delivery of IT
services, but often struggle to maintain momentum and end up in a repeated cost-cutting cycle.
■ IT organizations that develop a culture of optimizing IT costs are able to identify areas of
opportunity for cost optimization both within and outside of IT by establishing credibility as both
efficient financial managers and service delivery providers.
■ CIOs typically pursue quick wins in order to build a portfolio of accomplishments but do not
focus enough on demonstrating and gaining buy-in toward a longer-term vision that optimizes
costs in collaboration with business partners outside of IT.
■ A three-year roadmap provides an easily understood one-page document that CIOs can use to
market and refine the IT cost optimization (ITCO) vision to ensure transparency and stakeholder
buy-in for activities required to improve service delivery and business outcomes.

Recommendations
CIOs looking to manage cost optimization should:

■ Assess key opportunities within IT by conducting baseline measurements and establishing a

culture of a proactive cost optimization, facilitated by effective transparency and governance.
■ Develop a one-page, three-year roadmap to socialize and gain buy-in toward a more mature IT
cost optimization mindset. Revisit the roadmap at least annually with targeted stakeholders to
continually validate and advance the ITCO program goals and validate its positive impact.
■ Begin Year 1 with quick wins while demonstrating commitment in working toward the greatest
value-added areas for the organization by extending the vision through Years 2 and 3. Each year
will continue to introduce new quick wins while aspiring for greater opportunities.
 Table of Contents

Analysis.................................................................................................................................................. 3
Year 1...............................................................................................................................................5
Conduct Baseline Measurements............................................................................................... 5
Identify Cost Optimization Opportunities..................................................................................... 6
Establish Cost Optimization Governance.................................................................................... 9
Implement Quick Wins..............................................................................................................12
Year 1 Critical Success Factor and Key Performance Indicators................................................14
Year 2.............................................................................................................................................14
Determine Optimization Focus Areas........................................................................................ 14
Identify Year 2 Quick Wins........................................................................................................ 15
Identify Levels 3 and 4 Opportunities........................................................................................ 15
Align Processes, Skills, Tools and Metrics................................................................................. 15
Year 2 Critical Success Factor and Key Performance Indicators................................................15
Year 3.............................................................................................................................................16
Continuous Improvement..........................................................................................................16
Accountability for Cost Optimization......................................................................................... 17
Additional Considerations............................................................................................................... 17
Gartner Recommended Reading.......................................................................................................... 17

List of Tables

Table 1. Cost Optimization Survey Results Alignment With the Four-Level Framework.......................... 11
Table 2. Use Short-Term Cost Optimization Ideas to Gain Quick Wins.................................................. 13
Table 3. Year 1 Examples of KPIs and Metrics for a Critical Success Factor..........................................14
Table 4. Year 2 Examples of KPIs and Metrics for a Critical Success Factor..........................................16

List of Figures

Figure 1. Example of an IT Cost Optimization Roadmap......................................................................... 4

Figure 2. 2018 IT Key Metrics Data, Cross-Industry................................................................................ 8
Figure 3. Gartner's Four Levels of Cost Optimization............................................................................ 10

Page 2 of 19 Gartner, Inc. | G00350709

 Analysis
Many business leaders view IT as a black box of function and spending. This can result in top-line
management of IT budgets even though budget cuts impact tactical execution, performance and
quality. Numerous Gartner interactions with clients over a 17-month period that began in March
2016 show CIOs who lack a proactive, transparent approach to IT cost optimization will find
1
repeated asks for delivering more with less.

CIOs often approach IT financial management (ITFM) with an IT cost optimization initiative in
response to repeated demands for IT budget cuts. Too often, CIOs cannot defend IT budgets to
non-IT people. The response is to be a "good citizen" and meet the budget cuts with little to no
discussion of how the cuts will impact services. This only reinforces the perception that IT is not
very good at managing their budgets efficiently.

The three-year roadmap is a communication tool that CIOs can use to quickly articulate a
conceptual vision for the organization while also indicating specific year-over-year activities or
deliverables. The roadmap should be a unique articulation of the trajectory of an ITCO program
demonstrating a measurable baseline of opportunities that expand over time toward improving "run
the business" investments. Other baseline opportunities should be built in to enable greater
investment into "growing the business" and "transforming the business" spending categories as
influenced/directed by evolving business priorities.

Limiting the roadmap to a single page enables a stakeholder to

quickly assess the vision, goals and areas on which the IT
organization will focus every year. This will prompt discussions
on prioritization as well as assist in gaining buy-in for the
strategy and efforts required to achieve successful ITCO.

The three-year roadmap begins by indicating a general theme that will be carried out year over year.
In Figure 1, we begin the first year with an overarching goal of implementing ITCO.

Gartner, Inc. | G00350709 Page 3 of 19

 Figure 1. Example of an IT Cost Optimization Roadmap

ITCO = IT cost optimization; ITFM = IT financial management.

Source: Gartner (March 2018)

Page 4 of 19 Gartner, Inc. | G00350709

 The header points in Figure 1 indicate the key areas we commonly focus on during each year. The
bullets for each header indicate the more tangible activities/deliverables used to measure success.
Each item is kept at a high level to ensure the document is a "quick read" and easily understood.
These items could also be further developed into specific, measurable, actionable, relevant, time-
bound (SMART) objectives, but such granularity is unnecessary for the purpose served by the three-
year roadmap (see "SMART Objectives Help IT Improve Service").

Let's walk through the example of a three-year roadmap for ITCO improvement. This is only an
example; CIOs should adjust the headers and deliverables/activities according to their
organization's opportunities. Please note the directive: "Directional timing may be accelerated/
reprioritized based on stakeholders/business needs/activity." This indicates the roadmap is intended
to be a "work in progress" and all items are open for discussion and adjustment of timing. When
communicating the elements of the roadmap, it is important to add commentary on why each item
will improve or add value to the organization.

Year 1
Year 1 should focus on determining the baseline state of enterprise IT spending and the overall
maturity of the IT organization. Such an evaluation allows the CIO to understand and articulate the
current financial state of IT to senior executives as the precursor to year-over-year benchmarking,
cost optimization governance, institutionalizing cost optimization and continuous improvement.

Conduct Baseline Measurements

In speaking with several organizations throughout the world, the question often asked is not, "What
can I do to optimize IT costs" but rather "How do I do it?" To begin this journey, CIOs should assess
the current state of the IT organization because it is difficult to measure progress if an established
starting point cannot be demonstrated. Doing so affords the CIO the understanding of where IT is
and, with consult from the CFO and CEO, where IT needs to effectively allocate resources into
initiatives that will show the best value for the organization.

CIOs should baseline the IT organizations using one or all of the following four resources.

ITBudget Tool

A critical component to a CIO's success is the ability to effectively develop, present and manage
IT's budget. CIOs should use the Gartner ITBudget Tool to gain insight in the financial standing of
the IT organization. The tool allows CIOs to generate a personalized comparison of enterprise IT
spending across various metrics against vertical industry averages with which the enterprise is most
closely aligned. Some of those metrics may include revenue, operating expenses, enterprise head
count and distribution of IT investment levels.

Upon completing the assessment, CIOs can download a 27-page report. The ITBudget Tool looks at
not only how enterprise IT spending is distributed using an asset-based view (i.e., hardware,
software, personnel, outsourcing and public cloud), but also how IT spending is allocated by
investment class (i.e., "run the business," "grow the business" and "transform the business"). These

Gartner, Inc. | G00350709 Page 5 of 19

 areas, along with how IT spending is distributed by infrastructure and operations (I&O), application
portfolio and IT management categories, allow CIOs to have a greater view of where their IT budget
is being allocated. This expanded view provides better insight into articulating the business value IT
brings to the enterprise.

IT Financial Management Capabilities Assessment

Gartner's "Toolkit: IT Financial Management Capabilities Assessment" is designed to provide a

framework for CIOs to evaluate financial transparency to effectively manage enterprise IT spending.
CIOs can use the Toolkit to self-assess their capabilities across seven critical areas in IT financial
management. CIOs should take this assessment to determine the baseline of the level of
transparency they have in their IT budget to determine where they see themselves and how the
enterprise views the IT organization. Areas where there is divergence between the two warrant
review of internal processes to improve financial transparency.

Cost Value Matrix

CIOs historically evaluated the success of their IT cost optimization initiatives by focusing solely on
the total reduction in IT costs. But by also measuring what IT contributes to the enterprise, by way
of business productivity metrics, CIOs can evaluate the investments that have been and — those
that can be made — that will impact business success. The Gartner Cost Value Matrix framework
looks at how the IT organization is positioned relative to company revenue and margin. The 2018
matrix has four quadrants, represented by Cost-Inefficient, Cost-Efficient, Revenue-Efficient and
Value for Money, which compares to vertical industry averages. CIOs should take this assessment
to better understand how the IT organization is correlating current IT spending and business value
metrics (see "Toolkit: The Gartner Cost Value Matrix, 2018: A Framework to Measure IT Efficiency
and Business Value"). CIOs can further calculate a future cost value rating to assess whether the
current mix of cost optimization initiatives can drive the IT organization to the desired quadrant.

ITScore for the Enterprise

The Gartner "ITScore for the Enterprise" is another online self-assessment, this one allowing CIOs
to evaluate the IT maturity for the enterprise. The enterprise's maturity is an element of IT's role in
the organization; a maturity level is determined by evaluating the effectiveness of leadership across
the enterprise related to the depth of IT's capabilities. ITScore for the Enterprise's organizational
attributes focus on the enterprise's culture, operations, leadership, management and business
results. Depending on the score, the enterprise is placed on a maturity continuum, from Level 1
(Functional) to Level 5 (Transformational). CIOs can use this assessment to determine where their
enterprise falls along the continuum and then develop a strategy, utilizing IT resources, to advance
the enterprise's IT maturity.

Identify Cost Optimization Opportunities

Using the baselines determined using the resources above, CIOs should next evaluate how their IT
spending and costs compare to those within their vertical industry. Such a comparison allows CIOs

Page 6 of 19 Gartner, Inc. | G00350709

 to determine where their investments, strategy and allocation of resources are and how others are
spending in those categories.

Assess Cost Performance Using IT Key Metrics Data

Results of the ITBudget Tool provide CIOs with insight into enterprise IT spending and give them the
ability to compare spending over two years — a level of granularity they may not have seen before.
The ITBudget Tool also shows comparisons between enterprise IT spending and IT key metrics for
the vertical industry to which the CIO is aligned. By assessing how spending is distributed among
several categories, CIOs can determine the areas that may need their attention. Through several
interactions with Gartner, clients have found the greatest opportunity to optimize IT supply spending
is by evaluating IT spending by functional area (see Figure 2).

Gartner, Inc. | G00350709 Page 7 of 19

 Figure 2. 2018 IT Key Metrics Data, Cross-Industry

Capex = capital expenditure; Opex = operating expenditure.

Source: Gartner (March 2018)

Page 8 of 19 Gartner, Inc. | G00350709

 CIOs can leverage Gartner's IT Key Metrics Data by conducting a variance analysis between IT
spending levels within the enterprise and vertical industry averages. If there is a significant variance
in one or more IT domains, further evaluation should be done to determine the root causes. See
"Use Benchmarking to Identify IT Cost Optimization Opportunities" as a framework to identify areas
that require a deeper analysis.

Validate Against Gartner Research and Toolkits

Once the CIO has identified which IT functional area(s) require further evaluation, Gartner's IT Key
Metrics Data provides cross-industry metrics for per-unit I&O costs, application development life
cycle distribution and application support activity distribution. CIOs can use the "Toolkit: Use
Gartner's 2018 IT Key Metrics Data to Optimize IT Costs" to identify the metrics associated with the
IT domain area(s) that represent the greatest variance from the ITBudget Tool. CIOs will need to
calculate the metrics for these areas to conduct further variance analysis in support of cost
optimization.

CIOs typically have ideas for how they plan on tackling their cost optimizations initiatives. Along
with those ideas, Gartner has published a list of 536 IT cost optimization ideas, of which the top 100
have links to related cost optimization research CIOs can use to generate new ideas or validate
existing ideas and initiatives. The "Toolkit: Gartner's Top 100 IT Cost Optimization Ideas" allows
CIOs to create a customized set of ideas primarily based on the IT domain of interest.

As with any exercise, ideas for cost optimization do not add value at the same rate. Given limited
resources, and potentially a limited time to generate results from these cost optimization initiatives,
CIOs should evaluate each cost optimization initiative through an objective framework. This
evaluation allows for a true representation of what the initiative will yield upon successful
implementation. "Gartner's Decision Framework for Prioritizing Cost Optimization Initiatives"
provides a framework CIOs can use to evaluate cost optimization initiatives on elements such as
impact on the business, risk and the level of investment required. By evaluating multiple cost
optimization initiatives simultaneously, the CIO can determine which initiative to move forward on
now, versus which ones can be either delayed or eliminated entirely. CIOs can use "Toolkit: Using
Gartner's Decision Framework for Prioritizing Cost Optimization Initiatives" as a practical tool to
evaluate their initiatives.

Establish Cost Optimization Governance

As cost optimization initiatives are being surfaced, CIOs should develop a strategy to address
spending on the IT supply side versus IT spending on business demand. Gartner's four-level
framework for cost optimization (see Figure 3 and "The Four Levels of Cost Optimization") breaks
out the areas where IT has control over costs (IT supply) and where IT influences costs (IT demand).
This framework can be used to establish a brainstorming thought process to categorize and
proactively manage cost optimization ideas via a cost optimization governance team.

Gartner, Inc. | G00350709 Page 9 of 19

 Figure 3. Gartner's Four Levels of Cost Optimization

Source: Gartner (March 2018)

Results from a recent cost optimization survey show that respondents achieved either "good" or
2
"excellent" in terms of their organization's ability to optimize costs. Table 1 shows the cost
optimization initiatives along with the level to which they align, and the percentage of survey
respondents who achieved "good" or "excellent" results per initiative.

Page 10 of 19 Gartner, Inc. | G00350709

 Table 1. Cost Optimization Survey Results Alignment With the Four-Level Framework

Cost Optimization Initiative Four-Level "Good" or "Excellent" Results

Framework Alignment

Growing revenue from digital business initiatives Level 4 69%

Reducing business operating costs Level 3 68%

Negotiating spending reduction with the business Level 3 61%

Limiting business demand for IT Level 3 57%

Improving cost-efficiency of IT operations Level 2 68%

Application portfolio rationalization Level 2 56%

IT supplier negotiation Level 1 71%

Moving to lower-cost suppliers Level 1 61%

Source: Gartner (March 2018)

While evaluating cost optimization ideas, CIOs should also consider how mature the organization is
in these areas. As discussed above with the ITScore for the Enterprise, Gartner also has ITScore
assessments for procurement, which corresponds with Level 1 of the four-level framework, ITScore
for I&O (Level 2) and ITScore for Portfolio Management (Level 3).

To ensure success with their cost optimization initiatives, CIOs must establish a review cycle to
evaluate whether the initiative is at, surpassing or failing to meet expectations. CIOs should meet
with IT leaders who oversee the domain area under the cost optimization initiative. They should also
meet with business unit leaders to see whether there might be operational issues not accounted for
when the initiative was proposed and implemented. We recommend quarterly meetings, which
should include the metrics identified above using a preinitiative and postinitiative comparison to
ascertain whether the initiative is lowering costs.

During these quarterly meetings, the CIO and the IT management team should acknowledge any
obstacles that have been in their way that is precluding them from achieving their stated goals and
outcomes. The CIO or designee should meet directly with the business unit leader obstructing the
initiative to see what the issues are and how IT can help them move past them. The impasse may
be the result of a simple misunderstanding, or could be deep, underlying issues such as business
units being resistant to moving away from its preferred applications. In either case, the CIO should
address this by articulating the business case and proposed savings identified above (see "The
Politics of Powerful Partnerships" for advice on transitioning from order taker to partner). The CIO
should also develop a three-year plan for how cost optimization should be not only a one-off
exercise but also part of an ongoing exercise in IT financial management.

Gartner, Inc. | G00350709 Page 11 of 19

 In organizations where there is an IT CFO, that individual should be in charge of day-to-day ITCO to
drive accountability, track progress and continue roadmap development. It is likely that the life of
the roadmap as a "living document" may extend well past the CIO's tenure. Establishment of a role
to track and document success helps to ensure a running narrative of company progress in the
ITCO process.

Implement Quick Wins

IT may have low credibility or is not well-received from some business unit leaders in the
organization. To overcome such perception, CIOs should look to implement a strategy to build
organizational buy-in by way of a portfolio of quick wins. Van Buren and Safferstone define a quick
win as "a new and visible contribution to the success of the business made early in (the leader's)
3
tenure." Under the scope of IT financial management, we refine this definition to state a quick win
achieves an immediate cash saving without costing anything, or is entirely cash positive in the very
short term without requiring much spending. This portfolio of quick wins identifies the project, the
business case, the estimated cost savings stated at the beginning of the project and the realized
cost savings once the project has been implemented. Such a portfolio moves the CIO and IT from
speculating what the savings could be to a foundation of real soft- or hard-dollar savings.

Begin a quick-win approach by teaming up with a business unit leader whom the CIO feels there is
an established, good working relationship. Communicate expectations for what is to be
accomplished and how best IT can support the business unit in achieving their goals. Take note of
how conditions were prior to the quick-win initiative so that an accurate accounting of savings
realized can be stated in the portfolio. For a list of short-term cost optimization ideas to enable a
portfolio of quick wins, review Table 2.

Page 12 of 19 Gartner, Inc. | G00350709

 Table 2. Use Short-Term Cost Optimization Ideas to Gain Quick Wins

IT Supply ■ Renegotiate contracts

■ Read all contracts, stop payment for nonperformance

■ Vendor/contract consolidation

■ Sale and leaseback of IT assets

■ Vendor-funded transformation

Infrastructure and ■ Infrastructure and operations centralization, rationalization, consolidation

Operations,
Applications and ■ Cancel all nonessential maintenance with a view to disposing all nonessential services
Software Support
■ Defer all software updates that are not critical for security patches

■ Push back on and stop any new features or application development

■ Reduce application support service level

Cloud ■ Move on-premises applications to the cloud

■ Use cloud for peak consumption rather than keeping unused capacity to cover

Transparency ■ Delay benefits rationalization — collect promises from recent projects

■ Plan a sustainable strategy to restructure and lower IT operating cost base

■ Understand IT costs and key cost drivers (starting with the supply side and then IT
demand)

Staff ■ Release temporary or contract staff

■ Do not fill vacancies; keep full-time equivalent positions vacant as long as possible

■ Consider moving IT full-time equivalent positions into business units

IT Budget and ■ Categorize the budget using zero-based budget categories

Demand
■ Defer all asset refreshes and change depreciation policies

■ Freeze discretionary spending

■ Freeze travel and similar spending

■ Freeze/delay/stop all new project spending

■ Recategorize "change the business" demand to "run the business" demand

IT Team ■ Idea generation from multiple enterprise stakeholders and the IT staff

■ Proactive process with accountability across IT leaders

Data: Gartner analyst discussions on short-term cost optimization ideas

Source: Gartner (March 2018)

Gartner, Inc. | G00350709 Page 13 of 19

 Year 1 Critical Success Factor and Key Performance Indicators
CIOs often ask what is considered successful for Year 1 initiatives. It is important to develop a
critical success factor along with key performance indicators and aligned metrics as guides to
successful outcomes. With Year 1's focus on back-office efficiency and improved performance,
Table 3 provides example metrics on per-unit costs and cost percentages for which CIOs should
strive.

Table 3. Year 1 Examples of KPIs and Metrics for a Critical Success Factor

Critical Success Key Performance Indicators (Examples) Metrics

Factor (Examples)
(Example)

Per-unit costs Reduce per-unit costs for IT domains or service areas, or to the first quartile 39%
and cost
percentages

Increase IT investment to reduce the per-unit cost for business transactions or 15%
outcomes within the current fiscal year

Reduce the percentage of a targeted IT domain cost compared to total IT costs 30%

Reduce the percentage of asset liabilities on the balance sheet 10%

Increase the percentage of IT costs devoted to a domain to reduce the per-unit 10%
cost of capacity or future-demand estimates

Reduce the ratio of run-the-business IT spending divided by change-the-business 2.3

IT spending

Reduce lifetime total cost of ownership for assets, IT domains or IT services $4,600

Increase forecast of rolling-cost-savings estimate from IT actions or investments 12%

Source: Gartner (March 2018)

Year 2
Year 2 builds on the successes and opportunities realized during Year 1. It is also used to identify
and/or acknowledge activities that might have been considered overly difficult to achieve in light of
resources or other constraints during Year 1. Activities in Year 2 and Year 3 should always be
discussed in the context of Year 1 with stakeholders to ensure buy-in, not just to the strategy but to
the prioritization and timing outlined in the roadmap. After stakeholder discussions, it is expected
that the activities originally aligned to Year 2 activities may switch to Year 3.

Determine Optimization Focus Areas

Based on the level of success in Year 1 following baseline measurements, evaluate what areas were
most celebrated or valued. CIOs should be able to demonstrate a level of success by providing

Page 14 of 19 Gartner, Inc. | G00350709

 examples of how the IT organization has improved from the baseline taken the prior year, and
ultimately continue to demonstrate progress from the original baseline.

Explore additional areas of ITFM maturity that may expose further opportunities for IT cost
optimization.

Identify Year 2 Quick Wins

Year 2 quick wins should be somewhat more aggressive than Year 1. Additionally, they may include
quick wins that were deemed overly aggressive given resource constraints or other identified
obstacles.

Identify Levels 3 and 4 Opportunities

This is the opportunity to discuss ideas considered possible only with business/stakeholder buy-in.
By identifying these initiatives as part of Year 2 and/or Year 3, the CIO can address business
demand for IT services in order to optimize these costs. By having these initiatives on the one-page
roadmap, they are easily called out and discussed during the initial rollout of the roadmap, thus
fostering greater cooperation and/or partnership in furthering these ideas.

Align Processes, Skills, Tools and Metrics

As a proactive ITCO mindset and governance practice exposes processes, skills, tools and metrics
to be evolved, it is important to call out areas under this header that could be considered further
opportunities for improvement. With Year 2 principally focused on IT demand (Levels 3 and 4), re-
evaluate whether the ITCO governance model originally developed in Year 1 is meeting
expectations. Scrutinize initiatives where actual cost savings have not met expectations. These
initiatives may involve a need for some type of incremental investment to achieve identified benefits.

Year 2 Critical Success Factor and Key Performance Indicators

Initiatives aligned with Year 2 activities can yield savings for both the IT organization and the
enterprise as a whole. CIOs should look at developing key performance indicators and metrics that
will drive the success of IT demand spending reductions.

Gartner, Inc. | G00350709 Page 15 of 19

 Table 4. Year 2 Examples of KPIs and Metrics for a Critical Success Factor

Critical Success Key Performance Indicators (Examples) Metrics

Factor (Example) (Examples)

Demand drivers Reduce the number of devices per end user 2.1
and demographics

Tighten up the authorization process for IT resource request to increase refusals -10%

Reduce the number of non-mission-critical change requests to other systems 50%

and services

Reduce the number of applications, vendors, partners, ecosystems or 50%

unprofitable customers

Increase IT spending 15%

per employee

Reduce run-the-business spending or cost per business outcome or transaction 20%

Increase the ratio of front-office or customer spending dividing by the unit cost 2.8
of marketing and client acquisition

Increase employee productivity (revenue per employee or spending per $1 million

employee)

Source: Gartner (March 2018)

Year 3
Year 3 builds on the successes and opportunities realized during Years 1 or 2. It is also used to
identify and/or acknowledge activities that might have been considered overly aggressive to achieve
during Years 1 or 2, considering resources or other constraints. In this example, we purposefully
identify elements of Years 1 and 2 to demonstrate the theme of continuous improvement. None of
the activities for an ITCO journey are ever considered "done." Rather, they are continuously
improved upon.

In most organizations, Year 3 is composed of a hybrid of continuous improvement efforts as well as

new focuses from stakeholder discussions resulting from socialization of this three-year roadmap.
Additionally, as these concepts mature, CIOs will seek improved data and more effective methods
of delivery as the IT organization continues to improve. Consider preparing a report at the end of
each year or at the end of the three years to reflect what the budget would have been had no ITCO
program been implemented.

Continuous Improvement
Just as in Year 2, each year should begin with a reassessment of progress against existing
baselines and maturity to develop the path forward. As such, the ITCO governance body should
revisit the database of opportunities deemed overly aggressive to determine if the resources,

Page 16 of 19 Gartner, Inc. | G00350709

 political environment or other obstacles have changed such that previously identified opportunities
are now considered possible.

Year 3 should be considered aspirational as it will evolve each year the roadmap is revisited. As
such, we include revisiting alignment of processes, skills, tools and metrics as well as continuing to
identify quick wins and new Level 3 and Level 4 opportunities.

It is unlikely that Year 3 will ever look the same as it did from a Year 1 vision. That is, it should
continue to evolve based on the level of success in establishing and executing the ITCO vision.

Accountability for Cost Optimization

Each year in the sample roadmap shows how CIOs can optimize costs within IT (Year 1 focuses on
IT supply), and how to communicate with the business and optimize costs throughout the enterprise
(Year 2 focuses on IT demand). Then, Year 3 focuses on building on the successes garnered in
Years 1 and 2. To ensure the enterprise and IT maintain and improve on their cost optimization
successes, CIOs should work with executive leadership and business unit leaders to hold both the
IT organization and business units accountable for any increase in IT spending. Holding individuals
accountable for the level of IT spending demonstrates cost optimization is not simply done in
reaction to external forces. Instead, cost optimization is an internal, ongoing disciplined approach to
being judicious with the IT budget so that savings can be reinvested to "change the business"
activities to drive innovation (see "IT Cost Optimization Should Be an Ongoing Discipline").

Additional Considerations
Some organizations may utilize this roadmap as a template, but resource and other feasibility
considerations will help dictate what will be a realistic roadmap. All elements of Year 1 or Year 2 may
not be feasible; some of these items may become more realistic for Year 3. Consider the credibility
aspect of outlining an overly aggressive Year 1. It will be easier to add more items each year than to
continue pushing activities into future years and repeat Year 1 activities. Depending on the appetite
of enterprise stakeholders, CIOs may consider leveraging the concepts presented in the three-year
roadmap into a two-year roadmap to achieve similar results.

Gartner Recommended Reading

Some documents may not be available as part of your current Gartner subscription.

"Three-Year Roadmap for IT Financial Management Maturity"

"IT Key Metrics Data 2018: Executive Summary"

"IT Key Metrics Data 2018: Index of Published Documents and Metrics"

"Win at Cost Optimization With Nine Critical Success Factors and Their Metrics"

Gartner, Inc. | G00350709 Page 17 of 19

 Evidence
1 Approximately 16% of client questions centered on how best to begin or pursue cost optimization
in their organizations.

2 Gartner conducted this survey on cost optimization from April through June 2017. We qualified
and surveyed 254 IT and business leaders. All respondents were screened for visibility into overall IT
budget/understanding of IT cost in organizations representing different industries with at least 1,000
employees. The majority were C-level executives such as the CIO or CTO or reported directly to
them. No responses were accepted from respondents who worked more than two levels down from
the C-suite.

3 M.E. Van Buren, T. Safferstone. "The Quick Wins Paradox." Harvard Business Review. January
2009.

Page 18 of 19 Gartner, Inc. | G00350709

 GARTNER HEADQUARTERS

Corporate Headquarters
56 Top Gallant Road
Stamford, CT 06902-7700
USA
+1 203 964 0096

Regional Headquarters
AUSTRALIA
BRAZIL
JAPAN
UNITED KINGDOM

For a complete list of worldwide locations,

visit http://www.gartner.com/technology/about.jsp

© 2018 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. and its affiliates. This
publication may not be reproduced or distributed in any form without Gartner's prior written permission. It consists of the opinions of
Gartner's research organization, which should not be construed as statements of fact. While the information contained in this publication
has been obtained from sources believed to be reliable, Gartner disclaims all warranties as to the accuracy, completeness or adequacy of
such information. Although Gartner research may address legal and financial issues, Gartner does not provide legal or investment advice
and its research should not be construed or used as such. Your access and use of this publication are governed by Gartner Usage Policy.
Gartner prides itself on its reputation for independence and objectivity. Its research is produced independently by its research
organization without input or influence from any third party. For further information, see "Guiding Principles on Independence and
Objectivity."

Gartner, Inc. | G00350709 Page 19 of 19