BOSTON, March 21, 2013—Too much complexity in a company's IT environment can drive up the company's IT costs materially. It can also reduce the IT function's speed, flexibility, and ability to support the company's business objectives, taking a toll on the company's competitive prospects. But successfully tackling extraneous IT complexity is difficult and demands a multipronged approach, says a new report from The Boston Consulting Group (BCG). The report, Simplify IT: Six Ways to Reduce Complexity, is being released today.
Some IT complexity, says BCG, is inevitable and can actually be a major contributor to business value—by allowing the company to create a more differentiated product or service, for example. But much is ultimately unnecessary and should be eliminated or reduced to the extent possible. Doing so can be highly challenging, however, as IT complexity typically builds gradually and stems from multiple causes, including mergers and acquisitions and weak IT governance.
Yet IT complexity can be addressed with the right approach, the report says. And the impact on IT costs and performance can be significant. An effective IT-simplification effort can reduce application and infrastructure costs by up to 50 percent and total IT costs by as much as 30 percent. It can also give the IT organization far greater flexibility and agility and improve its overall ability to support the company's objectives.
Levers for Reining in IT Complexity
BCG's report identifies six levers for addressing IT complexity that cover both business-driven IT complexity and complexity that the IT function can address unilaterally. The levers, which can be pursued simultaneously, in sequence, or in isolation, are the following:
Intelligent demand management, or the provision of sufficient transparency to the business to allow it to make informed decisions about its demand for IT services vis-à-vis costs and business-value added
Scenario-based application rationalization, or the optimization of the number of applications through consolidation, replacement, and decommissioning
Infrastructure technology-pattern reduction, or a shrinking of the number of patterns (that is, configurations of hardware, software, and middleware elements) in the IT infrastructure to minimize the variety of technologies, processes, and skills necessary for application delivery
A simplified IT organization and an enabled IT workforce, or a trimming of management layers and the optimization of spans of control, coupled with efforts to ensure an appropriately sized and skilled IT staff
Effective governance and simplified processes, or the establishment of a comprehensive framework to optimize business-IT governance, combined with the simplification of processes through use of lean and agile methodologies
A shared-services model and optimized sourcing, or the adoption of a shared-services model to service delivery and the development of a unified, companywide sourcing model
The report discusses these levers in detail and illustrates their potential effectiveness with real-world examples, including examples of companies from the financial-services and industrial-goods sectors. The report also identifies must-haves for the successful design and implementation of any IT-simplification effort.
A copy of the report, which is part of BCG’s Game-Changing Program to help leaders and their companies capitalize on the opportunities created by the seismic shifts in the global economy, can be downloaded at www.bcgperspectives.com.
To arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or firstname.lastname@example.org.