Sorenson: Optimizing IT expenses with a holistic approach

SmartIT is a process developed by A.T. Kearney to optimize IT expenditures. Already successful across the commercial sector, holistic processes like SmartIT can help the DoD significantly reduce its IT costs.

Over the years, many commercial sector companies have attempted to optimize their IT expenses in much the same way the DoD still approaches this effort today—they looked at improving individual IT function activities from a number of narrowly focused angles, rather than with a holistic approach across the IT enterprise.

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Looking externally, they leveraged countries with low labor costs and low-cost suppliers for cost performance benefits, renegotiated contracts and streamlined mega-vendor relationships to reduce IT expenses, and cut costs by reducing the complexity of the IT portfolio (both assets and projects). From an internal viewpoint, they improved operating and cost effectiveness of the IT delivery model, standardized and harmonized IT processes to simplify the IT landscape, and modernized technology to realize cost and performance efficiency. In almost every case, they narrowed the focus to only one or two actions with limited goals and almost never applied cost-reduction actions to either internal or external IT operation transformation actions.

This old approach to reducing IT costs has not worked well. The primary reason for failure was that by narrowing the focus to only one or two business areas/units there was some improvement with local IT in the short term. However, the overall effect across-the-company was a non-efficient IT department.

So, many leaders have turned to approaches like SmartIT to reduce the IT expenditures. This transformational approach to optimizing IT expenditures evaluates the IT department as a whole, looks at all possible external and internal IT costs, and works throughout the entire enterprise—to capture potential value and tie everything together.

This new approach gains transparency in technology consumption, performance, and costs—transparency that enables IT expenditures to be measured, monitored, and therefore managed. When one company, for example, relied on traditional IT, no one ever asked why its web team needed hundreds of servers to handle its client applications. The web team ordered the servers and the IT department bought them and maintained them. However, nobody asked whether that was the right number of servers. Applying SmartIT, this question and several other ancillary questions about IT requirements across the company were answered. Overall, the transparency enabled by the holistic approach, led to a reduction in the number of servers and better management decisions on future IT expenditures.

SmartIT also improved the connection between the IT department and the rest of the business so others could better understand the value provided by the IT department. This approach helped the IT department do a better job translating business requirements into actions and more clearly explaining the results to the rest of the business. For example, a business unit generating much of a company's profits needed to remain up and running without downtime and needed to operate correctly against a set of business requirements. By maintaining a close relationship with the functional department leaders, the IT department determined what it had to do to meet those requirements and later reported to the CEO that financial trades were executed with less than one second latency, the department's systems were available 99.999 percent of the time, and credit balances were checked every night by 3 a.m.

Optimizing IT end-to-end

SmartIT optimizes IT end-to-end across nine dimensions, each with its own objective:

Digital Innovation/Technology Foresight optimizes IT digital priorities impacting application and infrastructure

These objectives are achieved by combining proven traditional approaches—such as outsourcing, demand management, and benchmarking—with state-of-the-art methodologies and techniques—globalizing the IT department, simplifying governance, using Agile and DevOps—to make SmartIT a holistic process for optimizing IT expenditure.

For example, commercial leaders today link IT strategy and business-value optimization to the digital/IT agenda and big data strategies using Digital Innovation/Technology Foresight, one of the most important aspects of SmartIT. As a result, they are able to not only articulate the business-IT value but, more importantly, manage it optimally.

Similarly, for Delivery Excellence, commercial leaders combine IT service delivery management, development, and operations and from the more traditional approaches with new techniques, such as Agile and DevOps. Traditionally in IT, there has been a "wall" between the development team, which builds the code, and the operations team, which installs it on the servers and maintains it. DevOps brings the teams closer together. As a result, the people who run the environments and maintain the code are working upfront with the development people, and the development people are working in the back-end with the operators. This combined DevOps process provides a more holistic control from end-to-end, preventing the optimization of just the development team or the operations team, closing the gap between them, and increasing quality while reducing delivery schedules to almost real time in a continuous release cycle.

Achieving organization-wide IT efficiency

At its core, SmartIT is about breaking down barriers that separate the parts of the organization and managing IT in a holistic, intelligent manner. As it has with a number of commercial companies, applying a holistic approach like SmartIT can help the DoD remove barriers that today inhibit IT leaders from truly transformational efforts. One company used SmartIT to better link the IT function to business requirements and learned that the department was over-delivering on resolving a specific customer-service issue. The IT department had installed a highly efficient process that solved this customer issue in less than five minutes, every time. However, this process was costing the company millions of dollars a year. Only after employing the SmartIT approach, did the IT department learn that the business needed the issue resolved in hours/days and not five minutes. The result was that it replaced the expensive process, saved millions of dollars, and still met the business requirement.

These examples reveal how leading commercial companies applied our SmartIT approach to achieve organization-wide IT efficiencies. Successes like this demonstrate that using this transformational approach to optimizing IT expenditures across as much of the DoD as possible can help significantly reduce its future IT expenditures.

Jeffrey Sorenson is president and partner, A.T. Kearney Public Sector & Defense Services, and retired Army LTG/former CIO-G6.

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