Relentlessly manage technology unit cost to serve
To provide the funds needed to acquire new technology to grow the enterprise and to eliminate technical debt, companies will need to look for opportunities to reduce unit costs for core/ commodity services. Some companies will need to develop the capability to identify true cost to serve—not just project expense, not just run expense, but a cost including total spend associated with the service over its lifetime.
Companies should eliminate waste associated with perceived versus actual need. To do this it can be helpful to adopt a Zero-based Mindset (ZBx) that focuses on identifying non-working money that can be freed up and re-invested in strategic growth areas. Services should be designed to an agreed required level of service versus always delivering the highest level of service at a high cost. Companies should also watch for entitlements such as multiple computing devices, white-glove service desks, company provided cell phones and high-end video conferencing that are misinterpreted as requirements.
As companies move out of technical debt and move to pay-as-you-go external services, the mix between capital and operating expense shifts more heavily towards operating expense. Additionally, companies incur short-term project costs associated with recovering from technical debt, in addition to the potentially higher cost of maintaining services to technical currency. Companies must plan for these changes in spend and mix as they move to a higher value IT operating model. They must look to unit service cost reductions and waste elimination, for example through ZBx initiatives, to fund value-enhancing initiatives.
Meet the challenge
Companies can meet the challenge of cost-effectively leveraging technology to deliver business value by reducing technical debt, collaborating for speed and financial leverage, and managing unit cost to serve to generate funds for growth. They will then be able to use technology at scale to fend-off industry disruptors while growing their business.
1 Accenture Strategy, 2018 Revenue Growth Study
2 Rangwala, Abizer, “A New Frontier for Technology - Using nimble innovation to drive profitable business growth”, 2016.
3 Jeruchimowitz, Paul; Colwill, Esther; Hudson, Naomi; McMillan, Kent; “Zeroing out the Past”, 2017.
4 Berthon, Bruno; Lyman, Michael; Kassack, Damian; Chakraborty, Kunal; “Mind the gap – what’s the distance between your digital operating model and your Digital Strategy?”