IT cost optimization is a discipline that includes the practices, capabilities and behaviors of reducing spending, reducing costs, managing service levels and showing the business value of IT.

Gartner considers IT cost optimization a top priority for IT organizations and enterprises. IT cost optimization can be done with or without new investments, can be initiated in the short or long term, and can be implemented during periods of economic downturn or expansion or during other transformational changes in an enterprise or industry. IT cost optimization, undertaken at both strategic and tactical levels and across all process domains, helps enterprises produce results, improve performance and formulate return-to-growth strategies. Critical elements of IT cost optimization include the enterprise's potential benefits, customer impact, time requirements, degree of organizational risk, degree of technical risk and investment requirements.

Long-term, effective IT cost optimization comes from joint business and IT decisions and disruptive innovation and technology. Finding solutions to the following scenarios is imperative, as they can derail your IT cost optimization initiatives:

A lack of consistent processes for optimizing costs across the enterprise

A lack of visibility into costs across the enterprise

A lack of executive-level sponsorship for the cost optimization initiative

Resistance on the part of IT users to change the way they consume IT (such as accepting lower service levels or getting rid of redundant systems)

A high proportion of fixed costs in IT (thus, costs often do not go down when business volume is reduced)

Gartner recommends that IT leaders follow six major phases in their execution of IT cost optimization. These phases may vary, depending on your organization and the extent of your involvement in IT cost optimization:

Strategize and Plan: Develop the business case, change plan, tactical plan and communications plan for an IT cost optimization initiative. Determine the scope, budget and governance, and acquire resources. Integrate the discipline with strategic IT and business plans.

Assess Current State: Assess the enterprise's history and approach to IT cost optimization. Identify risks and best opportunities across IT domains and the enterprise for cost optimization. Conduct a benchmark analysis, and identify best practices and methodologies.

Assess Competencies: Exploit best practices for IT cost optimization. Identify and assess competencies that are necessary to carry out the initiative.

Gain Approval: Build a business case for specific IT cost optimization initiatives, articulating how IT cost optimization helps the enterprise overall. Seek feedback and buy-in from stakeholders.

Implement: Execute specific IT cost optimization initiatives. Evaluate the use of internal and external resources. Set individual, team, project and program goals.

Operate and Evolve: Monitor and track IT cost optimization initiatives against expected results. Adjust your approach based on operational results and changing business needs. Create a dashboard and scorecard of IT cost optimization performance goals.

The following documents are foundational research for getting started with this initiative:

"The Four Levels of Cost Optimization"

"Decision Framework for Prioritizing Cost Optimization Ideas"

"Cost Optimization Through Improving Business Processes"