Cost Reduction Is Process Optimization, Leaning of Processes, And Rethinking Your IT Outsourcing Contracts

AT Kearney suggests rethinking your IT application outsourcing contracts. In their vision outsourcing still gives many advantages. But handle it as part of other cost reduction options like process optimization and leaning of processes.

In this article AT Kearney provides 5 suggestions for cost reduction:

1. Simplify the IT organization.
   Reduce the number of IT roles. Each role has a specific rate, and can be fulfilled by a specific person. General roles are cheaper, and more easily staffed.
2. Engage in joint comparison activities.
   Branch organizations, IT organizations, and management consultancy bureaus organize several comparison studies. The results give an excellent en cheap insight in your performance compared to other, similar organizations.
3. Improve your business processes continuously.
   Systems thinking and process optimization checklists are excellent sources for ideas to optimize your business processes.
4. Analyze and benchmark cost drivers.
   What gets measured, gets done. Only if you compare your KPI's with the best in class, you know what value you get for your money.
5. Negotiate better contract terms.
   Ask for proposals from more than 1 vendor. That keeps you sharp, and also keeps your vendors sharp.

This is a very good list with good solid suggestions for cost reductions. You can start now with the implementation. I have to mention that in my day to day experience I rarely encounter 'real' process optimization. To understand what I mean you must realize that elimination of processes en process steps no longer in use but still around should be your primary target for process optimization. As long as stay around they need continuously your attention, and drain scarce resources like people and money.

Therefore, the best principle and the best 'best practice' for quality improvement and for performance improvement is still this: Isolation goes for compensation. Problems that cannot occur do not need salvation. They do not use your scarce resources. So start your process optimization efforts always with lean thinking, reduction of the complexity of your business processes, and thus rising of your EBIT!

Share your vision with us. We like to hear from you. How do you optimize your business processes? And how do you outsource your IT contracts? Share your experiences with the Results2Match Community!

Can you use some help to rethink your outsourcing contracts? Or do you want an assessment of your potential cost reductions? Or a Quick Scan on an important business process? Contact Hans Lodder now!

Or do you want to further professionalize your own staff with regard to process optimization, Quick Scans or Assessments? Let Hans Lodder train and coach them now!