6 Questions Every CIO Should Be Prepared To Answer
Traditionally, IT cost management has traditionally been the sole responsibility of the CIO, mainly because IT was viewed as something used to support business strategies, not drive them. But in recent years, this view has changed as many CEOs, CFOs, and other stakeholders now understand the enormous value of IT as wells as how IT cost management can impact the business.
The CFO's role is especially crucial to the IT cost management function if an organization wants to cut wasteful spending in favor of valuable IT programs. Be ready to answer these six questions about your IT costs situation if your CFO has started to accept his new expanded role and responsibilities in this area:
1. Are we overpaying for support?
Paying too much for support and maintenance is all too common these days. Now is the time to evaluate your current agreements to make sure that you are not over or under supported. If you are not already using a third-party support provider, it is a good idea to consider your options - you may save as much as 50 percent over vendor prices.
2. Do we have flexibility with our vendor choices?
Businesses will often purchase from the same vendor time after time because there is an established relationship and possible discounts. But it never hurts to check out the competition to make sure you are getting the best deal available. It can also provide leverage for your next negotiation with your preferred vendor.
3. What is fair market pricing for our purchases?
Unfortunately, a price list for every product available doesn't exist, at least not one that is available to the public. Even worse, prices can change radically and frequently on many IT equipment and services. Avoid paying too much by staying abreast of current pricing standards and insisting on transparent contract terms.
4. Should we create a position for IT purchasing?
Many businesses are now realizing the need for both Vendor Management Offices (VMOs) and IT Controller positions to help optimize IT purchasing. These new roles are becoming more and more necessary because most IT managers don't possess the sourcing experience necessary and IT purchases are too complex for most purchasing departments. Ideal candidates have the required IT sourcing and purchasing knowledge to get the job done.
5. Do we have any fixed-fee engagements?
If the answer to this question is yes, it is time to renegotiate your engagements on a time and materials basis instead of a fixed-fee. This type of engagement is a misnomer as they are usually not really fixed and commonly incur overage charges and additional fees.
6. Are our IT purchases aligned with our overall goals?
Before any new IT investments are made, take care to ensure that they are in line with the goals and strategies of all other departments. You can do this by giving IT mangers access to the needs and goals of each department. Once aligned, financial risk is minimized and IT purchases can be made that are beneficial to the whole organization.
The CFO's role is especially crucial to the IT cost management function if an organization wants to cut wasteful spending in favor of valuable IT programs. Be ready to answer these six questions about your IT costs situation if your CFO has started to accept his new expanded role and responsibilities in this area:
1. Are we overpaying for support?
Paying too much for support and maintenance is all too common these days. Now is the time to evaluate your current agreements to make sure that you are not over or under supported. If you are not already using a third-party support provider, it is a good idea to consider your options - you may save as much as 50 percent over vendor prices.
2. Do we have flexibility with our vendor choices?
Businesses will often purchase from the same vendor time after time because there is an established relationship and possible discounts. But it never hurts to check out the competition to make sure you are getting the best deal available. It can also provide leverage for your next negotiation with your preferred vendor.
3. What is fair market pricing for our purchases?
Unfortunately, a price list for every product available doesn't exist, at least not one that is available to the public. Even worse, prices can change radically and frequently on many IT equipment and services. Avoid paying too much by staying abreast of current pricing standards and insisting on transparent contract terms.
4. Should we create a position for IT purchasing?
Many businesses are now realizing the need for both Vendor Management Offices (VMOs) and IT Controller positions to help optimize IT purchasing. These new roles are becoming more and more necessary because most IT managers don't possess the sourcing experience necessary and IT purchases are too complex for most purchasing departments. Ideal candidates have the required IT sourcing and purchasing knowledge to get the job done.
5. Do we have any fixed-fee engagements?
If the answer to this question is yes, it is time to renegotiate your engagements on a time and materials basis instead of a fixed-fee. This type of engagement is a misnomer as they are usually not really fixed and commonly incur overage charges and additional fees.
6. Are our IT purchases aligned with our overall goals?
Before any new IT investments are made, take care to ensure that they are in line with the goals and strategies of all other departments. You can do this by giving IT mangers access to the needs and goals of each department. Once aligned, financial risk is minimized and IT purchases can be made that are beneficial to the whole organization.
About the Author:
Joseph B. Kappernick specializes in helping Fortune 500 companies save money. He recommends that you visit NPI to learn more about IT cost reduction consulting consulting
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