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McKinsey: managing IT costs during the COVID-19 pandemic

Consultancy company McKinsey & Co has released a report outlining practical measures for CIOs looking to control increased IT costs during COVID-19

Consultancy company McKinsey & Co has released a report outlining practical measures for CIOs looking to control increased IT costs during COVID-19.

Whilst the socio-economic collateral of the pandemic is widely reported and acknowledged, it can be easy to overlook the new operational challenges and their associated funding implications.

The problem, however, is in an intricate one; McKinsey notes that the CIO of an energy company it spoke with commented, “We need to bring costs down quickly, but in a smart way.” Therefore, an intelligent, reasonable and well-paced approach is skillfully needed. 

Identifying reductions

McKinsey advises that CIOs move to quickly formulate strategies which could potentially free-up large sums of money quickly whilst still leaving infrastructure relatively constant. These include:

Defining cost-reduction measures: By taking stock of available assets, CIOs can develop a broad picture of an organisation and identify the most optimal places to begin reducing costs. 

Recognise IT’s flexibility: McKinsey estimates that 30% of IT spend can be reduced by leveraging tech’s inherent adaptability. Reducing demand volume, postponing non-essential projects and decommissioning rarely used applications can all add up.

Invest in the ‘new normal’: Defined as the working environment post-COVID-19, the new normal is likely to harness remote working and other unconventional business models. Investing in ways to make these more productive will save money in the long run.

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Adapting tech for a new era

Whilst the changes that will need to be implemented are likely to be complex and far-reaching, McKinsey emphasises that early innovators should be able to reap what they sow quickly:

“Many CIOs are already implementing some of these actions in their own area of responsibility. But the big unlock comes from working with the business to understand where there is reduced demand, and then dialling back the support of IT services and systems. 

“One company recently reduced IT costs by 20% within six months simply by limiting day-to-day demand for services and applications such as maintenance and shifting from on-site to remote support, without even touching the project portfolio or renegotiating contracts,” said the report.

Also, CIOs must realise that the pandemic has, in fact, presented them with an opportunity to streamline operations in ways never imagined before; with the rulebook discarded due to virus’ unanticipated global reach, a new era for enterprise IT is beckoning. 

“In times of crisis, when companies need to make significant cost reductions, the CIO is always in an interesting spot. While IT must contribute to overall cost savings, it must also optimize the performance of the business. 

“In the 2008–09 financial crisis, for example, as much as 30% of IT cost savings were reinvested into business performance. How well CIOs manage such investments can determine how effectively IT can drive business performance overall.”

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