I’m often asked whether the primary role of IT – both as a department and a discipline – is to reduce expenses or to drive topline growth. Depending on the context and situation, the answer is yes to both.
Of course, as a leader you always have to focus on cost, and that never really goes away. To succeed you have to manage IT with true financial discernment, which means keeping your finger on the pulse of the cost base. To me cost savings are not a point in time exercise either. They’re about using a continuous improvement mindset: what were last year’s savings versus this year’s? Priorities might have shifted as well, so cutting more each year isn’t necessarily the right decision.
Earlier in my career, when I was in transportation logistics where the use of advanced analytics in the shipping industry was relatively new, I challenged operational research experts to demonstrate the potential value of such a tool. The resulting application looked at our sales forecast on one side and the available assets and their location and it helped us calculate the optimal way to get the assets to the right place at the right price to fulfill the demand. That cut down on our freight costs and improved our margins. It was a real eye-opener and an opportunity to educate our C-suite at the time that technology could help to drive topline revenue, not just cut costs. It’s not dissimilar from the pricing revolution that the airline industry launched with Sabre Reservation System.
More recently, we have worked to develop the NetApp-on-NetApp Program, where the goal is to build brand awareness and loyalty for our company. Similar to the example above, we are working on a tool where the goal is to provide a tailored Quote/Proposal to our customers that make the most sense for them, including the right price. By providing this, IT has helped simplify a portion of our sales process while deepening customer relationships.
IT savings generates better investments
On the savings side we recently went through a vendor consolidation process and brought our IT costs down. But that wasn’t the end of the story. With a continuous improvement mindset, it’s possible to look at several different paths to take with cost savings:
- Use the savings to add to current technologies areas where you might be under-invested
- Use the savings to invest in new technology categories that can in turn drive revenue, using your savings to self-fund
- Bring the savings directly down to the bottom line
In our case, we chose to fund a new IT Financial Management Software, which ties IT Services to total cost of ownership across technology lifecycle and to value realized. It also benchmarks these metrics with industry, enabling us to optimize the services and costs. Solutions like this are key to becoming a cloud broker, because you need a service mindset to look at where you should put workloads in the cloud and understand the total costs associated with providing that service, and continuously get better. These kinds of capabilities will take our financial discipline within IT up to the next level.
In conclusion, never take a one-dimensional view of cutting costs in IT. You might be overlooking some significant revenue potential for your company.
Cynthia Stoddard is the senior vice president and CIO at NetApp. In her role as CIO, she is responsible for providing a long-term technology vision that supports and is aligned with the company’s strategies and goals, business plans, operating requirements, and overall efficiencies. She has over 25 years of business experience and IT expertise leading large global organizations in supply chain, retail, and technology companies.
