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From Overhead to Opportunity: Immediate IT Expense Reduction Strategies

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Just reading through the headlines of the articles delivered to me daily causes empathetic stress.  Poor bottom line performance and staffing have become acute problems.  So, what should be done immediately?  This first of three blogs addresses some actions you can take immediately – that is, now.  The second will address short and medium term actions – 1 to 2 years.  The third will deal with longer term actions.  Regardless of the timeframe, the planning and preparation for all three should begin now.

It’s typical that when bottom line performance is not what was projected, the overhead departments are examined first.  Given that IT is usually the largest of the overhead areas, it makes sense to go there first.

Most organizations under financial pressure generally start with expense reduction.  That is always useful but not necessarily comprehensive.  A business usually cannot save its way to success.  Financial recovery should also include two other very important activities: revenue enhancement and business transformation which will be covered in the next two blogs.  StarBridge Advisors can help with all three activities.

IT Expense Reduction – Immediate

Start with an expense review assessment.  Any mention of such an activity will have an immediate and usually negative impact on morale and could impact productivity.  You must be transparent and candid with the staff about the implications of such a study.  Treat this as an opportunity for IT to help the organization not just survive but prosper – something you must believe.  If not communicated properly and broadly the discussion of an assessment could exacerbate the staffing issues for IT and concern those outside of IT who would benefit from IT-enabled or IT-dependent projects that may have to be scrapped in an effort to reduce expenses.

There are many potential expense reductions including but not limited to:

  • Application rationalization
  • Review of
    • Invoice history
    • Operating and capital budgets, depreciation and amortization schedules
    • Asset inventory and leasing schedules
    • Allocation methodology
    • Primary IT contracts starting with those that renew in the next 2 years
    • Communication modalities (data, voice, and video networking) contracts
    • IT costs carried outside of IT (sometimes referred to as shadow IT) to ensure your organization has a true and comprehensive view of IT costs, consolidating where possible
    • Disaster recovery approach
    • Buy versus build approach
    • On-premises versus cloud approach
  • IT performance metrics – benchmarks and baselines and adjusting IT-enabled operations to meet what your organization needs and can afford
  • Process optimization which may involve automation, often AI-enabled
  • Infrastructure review looking for opportunities to right-size
  • Staffing, only as a last resort, retooling whenever possible and practical

Quantify each of the items above.  It’s important to act quickly and deliberately.  Given the fact that impacts will be felt far beyond IT, it’s critical to use your existing governance bodies and processes to prioritize the expenses which you propose to eliminate.  In my experience, getting the operators and other impacted users involved in this process helped surface champions of IT projects who were passionate advocates for or against an expense reduction given the impact on their stakeholders.  It was common for them to step forward to champion their cause.  Often, when they wanted to avoid an expense reduction, they helped identify cost savings in other areas to save their project, a selfless act focused on preserving clinical and administrative capabilities that served the best interests of the patients, their families, the staff, and the providers.  Those conversations were challenging but often strengthened internal partnerships.

None of the activities above are easy.  They all will require strong industry and community partnerships – some internal, some external – and effective communication, coordination, and collaboration.  When budgets are tight, decisions can be impacted by internal politics.  Some decisions may be  based on long held, but not necessarily valid, beliefs about the “right way” to do something.  Having an external 3rd party advisory firm with experienced professionals who have had to live with the short and long-term consequences of their decisions in similarly situated provider environments can be important.  Having unbiased reviewers who can diplomatically recognize and address the “sacred cows”, speak truth to power, understand the implications and importance of their recommendations, provide practical and pragmatic solutions to problems, and leverage the existing investments is invaluable.

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