Periodically assessing the effectiveness of your IT services spend is vital to uncovering opportunities for optimization and areas where you may be falling short of future demand.
From a CEO’s perspective, an optimized IT services portfolio maximizes cost efficiency, flexibility, and scalability. It allows the organization to focus on its core business while managing risk and accelerating time to market for new products and services. It ensures strategic alignment with business objectives, allowing the organization to strategically allocate resources to projects that directly contribute to those objectives, because CIOs have access to specialized knowledge and skills that are not readily available in-house.
Highly optimized portfolios leverage outsourcing to ensure that commodity-based delivery is shifted to outsourcers, freeing up internal teams to focus on strategic projects that add value and effectively manage costs.
The challenge for most organizations, however, is knowing how to assess whether their IT services portfolio is properly optimized. The following steps will help IT leaders assess the current level of optimization in their IT service portfolios and understand the impact that future demand will have on maintaining or improving the overall service portfolio.
Demand for third-party IT services continues to increase despite ongoing economic challenges. Businesses continue to look outside their organization to fill critical roles and large projects with outsourced IT services talent.
Taking stock of the distribution of services across service types will expose imbalances within service areas and opportunities to assess the strength of spend allocation across your provider base. Armed with multiple views of your IT services spend by vendor, service type (consulting, consulting, systems implementation, application support, or infrastructure support), and geography, it provides aggregated views of spend from multiple perspectives.
A view of historical and current spend by provider helps organizations assess the efficiency of spend allocated across their portfolio. It also helps identify risk areas where supplier spend has decreased and opportunities to reopen terms for suppliers whose spend has increased.
Aggregating demand for IT services is the most impactful lever that companies have at their disposal when looking to negotiate with their IT services partners for better terms and cost savings. Empowered by a view of future demand and the ability to apply that potential demand to their current IT spend inventory, IT leaders will be better equipped to identify areas of leverage and risk as providers’ market share of their IT spend shifts over time.
Understanding the current distribution of IT services spend by category, along with a view of potential incremental demand, will help you assess the leverage you have with each of your key strategic partners.
The next step in assessing the strength of your current third-party IT services portfolio is to take stock of your internal vendor performance. A highly optimized service portfolio is not just about cost, but also about efficient use of contracted resources.
Periodically assessing the efficiency and performance of your third-party vendors will expose inefficiencies in both delivery and support. Clear signs of inefficiencies should be investigated and you should work with your vendors to mitigate these inefficiencies. Project delays, high levels of attrition and deadline extensions are direct indicators of inefficiencies in delivery that need to be addressed.
Consistently missed service levels, long backlogs of enhancement requests and high levels of attrition reduce the efficiency of managed service support and impact business productivity. Taking stock of the performance and efficiency of your vendor base will be a valuable perspective that will inform future sourcing decisions regarding new net demand or changing sourcing preferences.
The IT services market is facing an unprecedented combination of headwinds and tailwinds that are complicating how customers engage with IT service providers. Strong headwinds, such as the “great rate reset” in Q2 2022, unprecedented attrition, and resource shortages have left companies scrambling to source, secure, and retain the talent they need at affordable costs.
But advances in artificial intelligence and quantum computing have come with the promise of opportunities that IT leaders must evaluate to determine when and how best to leverage these technologies.
With IT service costs outpacing rising cost-of-living adjustments, companies cannot afford to pay more than the market can afford. More and more companies are taking the offensive when looking for opportunities to reduce their overall IT services spend.
Optimizing your IT services portfolio is a process, not a one-time project or event. Continuous and rigorous evaluation of your sourcing strategies, supplier performance, go-to-market strategies and ongoing supplier performance management will ensure that you are periodically testing the optimization of your investments to ensure that your return is maximized.
Combining objective metrics on what the market offers with its demand will effectively position your organization to make the best sourcing decisions that generate the most value and make the most of your investment.
Empowered with insight into the distribution of current third-party IT services spend by service type, projected demand, supplier performance metrics and real-time market intelligence, companies are realizing cost optimization opportunities of 10% to 20%, sometimes even more.
Want to learn more about how LeanIX can support your IT services portfolio optimization journey? Contact us!
By subscribing, you agree to our Privacy Policy.
At NUMEN, we are on a mission to connect technology and human expertise to deliver exceptional solutions.