Rationalisation made easy

DLA Piper Middle East’s Hinal Patel, Kelly Tymburski and Paul Allen explain how IT professionals can go about putting technology rationalisation into practice

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Rationalisation made easy “Technology rationalisation aims to streamline the IT that is deployed.” - Hinal Patel, partner, Head of Technology Sourcing, Middle East, South Asia and Africa
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By  Kelly Tymburski , Hinal Patel , Paul Allen Published  June 15, 2009 Network Middle East Logo

Following years of buoyant if not booming trading conditions, IT spends were trending upwards to support growth and expansion of organisations. Now, many businesses are being forced to become more efficient and lower their IT capital and operating expenditures in line with what are arguably the fiercest trading conditions since the dot.com bubble burst in the early 2000s. With this switch in emphasis from growth and expansion to efficiency and cost reduction, technology rationalisation is one technique which IT departments can adopt to help.

What is Technology Rationalisation exactly?
Put simply, technology rationalisation aims to streamline the IT that is deployed to support the organisation. Implemented properly, this technique can be an effective tool to realise efficiencies and reduce IT spend by removing under-utilised, support-heavy or unnecessary IT applications, infrastructure and services. On the other hand, if this technique is implemented poorly, an organisation could be exposed to legal, commercial and operational risks which have the potential to eradicate the efficiencies or cost savings that the organisation was striving for in the first place.

Technology rationalisation aims to streamline the IT that is deployed to support the organisation. Implemented properly, it can be an effective tool to realise efficiencies and reduce IT spend by removing under-utilised, support-heavy or unnecessary IT applications, infrastructure and services.

The question being asked by many IT managers and CIO’s though is whether technology rationalisation is right for their organisation. Many organisations will benefit from a properly implemented technology rationalisation program.

There is a very strong chance that technology rationalisation will bring about meaningful benefits for an organisation where it has predicted or is undergoing a reduction in headcount; been overly enthusiastic in its adoption of new technologies; set about establishing a shared services centre; undergone a merger, acquisition or some other form of corporate reorganisation; or decided to move from a decentralised IT procurement function to a centralised one.

In any one of the above circumstances, it is likely that there will be superfluous technology in that organisation which could be ‘rationalised’ or that supplier arrangements may be modified to deliver efficiencies or cost savings.

Examples of this can be where an organisation has suffered a drop in headcount, it may be that user-based software licences, desktop computers and network capacity requirements can be scaled-back. Depending on the contracts the organisation has in place with its vendors or service providers, the fees associated with superfluous technology can be targeted for removal.

If an organisation is implementing a shared services centre, its infrastructure needs may be reduced. Again, depending upon the arrangements it has in place with its relevant suppliers, the organisation can look to reduce spend on any leasing, hosting or maintenance services associated with any hardware that is no longer needed.

Finally when compared to decentralised IT operations, centralised IT departments are more likely to have (or there is generally more scope to agree) major procurement contracts which have preferential commercial terms simply due to the volume of business that is likely to be generated under them. Centralising IT operations and outsourcing certain aspects of those operations is a well-trodden path to realising efficiencies or cost savings over the medium to eventual long term.

How can your organisation implement a Technology Rationalisation program?
Like most things in the IT world, ‘one-size fits all’ solutions are rarely as effective as a solution which is tailored to the specific shape, size and needs of the organisation. Having said that, the process described as follows should help any organisation to develop a technology rationalisation program that works for it.

If an organisation is implementing a shared services centre, its infrastructure needs may be reduced. Again, depending upon the arrangements it has in place with its relevant suppliers, the organisation can look to reduce spend on any leasing, hosting or maintenance services.

First, prepare a long list of ‘candidates’ for rationalisation, the guiding principle being: what can we get rid of without having a negative effect on the performance or output of the organisation? This is where your IT department’s expertise and knowledge will be critical. Your IT department should be able to identify your organisation’s existing portfolio of infrastructure and applications and associated vendors and service providers, evaluate whether they are necessary for the purpose of meeting current and anticipated needs, and then identify them as ‘candidates’ for rationalisation if they are not.

Second, from that long list, gather together all associated contracts. These will need to be reviewed by legal counsel as well as your commercial or procurement function as part of your decision making process - for this you can see step four to assist in settting this up.

Third, establish a set of criteria and a scoring system which will be used to prepare a short list of candidates for rationalisation. This criteria needs to be derived from your organisation’s needs not only from a technology perspective, but also from a commercial and legal perspective. Criteria includes technology and legality.

Additionally, ‘wider’ issues need to be considered such as the financial stability of the vendor or service provider as well as the relationship between the parties.

Fourth, undertake a detailed review of the long list together with associated contracts and use your scoring system to identify your short list of candidates.

Fifth, prepare a technology rationalisation plan with respect to your short list to bring about the efficiencies or cost savings.

Sixth, having obtained all internal approvals, implement your technology rationalisation plan. This is likely to mean that existing contracts might need to be re-negotiated or terminated. On the technology front, your IT experts will need to carefully manage any transition so that the technical needs of your organisation are met during the implementation of the technology rationalisation plan.

What other benefits can technology rationalisation deliver users?
Other benefits from a technology rationalisation program can be diverse. For example, simplification or standardisation of technology may result in improved system performance and therefore productivity. In highly regulated sectors, the simplification of systems can also reduce the costly and cumbersome obligation to ensure that regulatory changes are effected throughout a number of different systems. Even environmental sustainability objectives may be achieved, due to the simple fact that efficient IT environments require less power and resources to operate.

Generally speaking, taking the opportunity to strategically review and align your organisation’s IT environment with business needs should lead to wide and perhaps substantial benefits.

Technology rationalisation represents a genuine opportunity to unlock efficiencies or savings in your organisation. The key to successful technology rationalisation is a holistic approach: too exclusive a focus on cost-cutting may hinder the emergence of other substantial benefits created by streamlined IT systems which are strategically aligned to your organisation’s needs and desires.

The aim should be to establish cost-efficient and simplified IT systems that not only meet your organisation’s objectives but also increase the overall value derived by your organisation from those systems. Technology rationalisation is a crucial and valuable tool in these times.

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