Decision Making – Data Driven or Guessing ?

Decision Making – Data Driven or Guessing ?

Governments, companies, and individuals are facing an unprecedented squeeze and looking to cut spending and save money. In early June, here in the UK, Cazoo announced 750 job losses or about 15% of its workforce. At the end of November, H&M announced it is to cut 1,500 jobs to save 2bn Swedish Kroner a year as sales slow down and costs increase.

Tech companies are not immune from this economic downturn. Netflix announced 150 job losses in May and in early November Meta reported it would be cutting 11,000 jobs after falling revenues, being overstaffed and “inefficient”.

Companies are taking action to protect their bottom line.  However, cost reduction can be a simple reactionary slash and burn exercise with minimal consideration of the consequences.

Over time, it becomes harder to simply cut costs and still meet the business’ objectives. Business leaders have to do more with less.

This needs a mindset set shift from cost-cutting to cost optimisation; from delivering immediate but unsustainable financial results, to sustainable and long term financial savings whilst continuing to provide the business with the required capabilities.

It has been said many times that all companies are software companies.  So, how do organisations save money when it comes to software costs?  Do they know who is using which software products or if the software is being used effectively?

As the author and business process improvement expert H. James Harrington wrote “Measurement is the first step that leads to control and eventually to improvement. If you can’t measure something, you can’t understand it. If you can’t understand it, you can’t control it. If you can’t control it, you can’t improve it.”.

The obvious answer for managing software costs is having access to the data to understand what is being used and by who.  That requires detailed information that can tell you who is using what software, for how long it is being used and where users are spending the most time.  This information is crucial to starting an app rationalisation program, without knowing what is or isn’t used you are making gut based guesses not evidence led decisions.

App rationalisation initiatives can generate significant savings.  A global pharmaceutical company worked with Gartner Consulting to rationalise their application portfolio and created a line of sight into $30-75M of cost optimisation opportunities.

Product analytics and usage data can be a key part of any application rationalisation strategy which can help business leaders to:

Reduce IT costs – by managing licences, and user numbers which can lead to further savings on maintenance, integration, training and vendor management.

Reduce IT complexity – fewer product integrations and dependencies meaning reduced impact of change and worrying about what could go wrong.

Reduce IT risk – fewer vulnerabilities, fewer back doors available for threats to break into and fewer knock-on effects if compromised.

App rationalisation can enable organisations to focus their efforts and resources on providing a better core product to customers rather than an unnecessary assortment of options.

Peter Drucker said, “Efficiency is doing things right.”  In the world of software and technology, it’s more than that. It’s doing the right thing the first time and ensuring that IT assets and services are fully utilised.

Business and IT leaders face growing cost optimisation challenges.  Utilisation metrics can help prove that the IT leadership team is addressing the organisation’s cost and concerns. Ratios looking at average number of users per day or the cost of efficiency improvements can help drive and prove cost optimisation initiatives.

Analytics and metrics help and prove the value of focused investment to deliver real savings.

References:

  1. https://www.oecd.org/economic-outlook/ 
  1. https://wraltechwire.com/2020/01/28/pendo-study-with-80-of-features-not-used-software-execs-re-evaluating-success-metrics/
  1. https://emtemp.gcom.cloud/ngw/globalassets/en/information-technology/documents/customer-success-stories/driving-$30-75m-of-cost-savings-through-apps-rationalization-client-success-story-final.pdf

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