Five principles to guide IT cost reduction

ASG Group

By Marcus D’Castro, ASG Group
Wednesday, 03 June, 2020



Five principles to guide IT cost reduction

Software asset management can save government agencies millions of dollars and dramatically decrease risk.

With the National Cabinet announcing its three-step plan to gradually remove baseline restrictions and make Australia COVID-19 safe, our nation has begun its careful journey towards recovery.

Yet at a government business level, the sprint that saw agencies rapidly respond to COVID-19 issues and public health requirements by adding new capability and IT capacity to cope with immediate demands has now become a marathon — the finish line is not yet in sight.

The focus for many government agencies and departments has moved beyond implementing measures for business continuity and on to the next stage… dealing with the flow-on effects, such as increased risk and substantially increased IT costs.

Those agencies and departments have a few new challenges to navigate.

For example, there could be increased risk from the use of non-compliant software that was implemented to respond to immediate critical needs, as well as software vendors ramping up client audit activities as an alternative means to achieve their revenue targets.

There are also uncertainties and potential changes regarding budgets due to government spend on COVID-19 issues, with the added unknown of the federal budget delays for FY21.

The impact of this on planned ICT projects is likely to be the cancellation of major programs of work, which creates a shifting landscape for software requirements and usage.

The solution is to find sustainable and innovative ways to cut costs whilst still delivering for citizens.

Five principles for reducing costs

Effective cost reduction services look at ways to maximise value from existing investments, without losing focus on customer and growth opportunities. Here are five principles we recommend that government departments and agencies should follow:

  1. Make cost reduction a core competency by focusing on continuous, long-term improvement rather than viewing it as a once-off initiative.
  2. Tie cost reduction to citizen centricity by focusing on how to reduce costs in a way that uplifts the quality and relevance of services provided to citizens.
  3. Find ways to collaborate and communicate. Resilience and cost optimisation can become a lot stronger if they are approached from a community perspective. For example, open dialogue with citizens, your supply chain and other government agencies can reveal new methods of collaboration that leave all participants better off.
  4. Establishing a culture of trust is a key enabler to being able to establish a culture of continuous cost reduction.
  5. Change the mindset. The traditional approach to reducing costs has often centred on reducing staff and eliminating projects. On their own these approaches can actually harm efforts to establish a continuous improvement culture and they also close channels from which great ideas often originate. A better approach is to question everything in a holistic manner and constantly use alignment with citizen-centric strategic goals as an evaluation filter for any decision being contemplated.

Group 10 Consulting — a capability arm of ASG — has seen an uplift in requests for software asset management (SAM) assistance. SAM is a business practice that involves managing and optimising the purchase, deployment, maintenance, utilisation and disposal of software applications.

During periods of major change, effective SAM activities are more difficult to carry out than in normal circumstances. This is mostly due to widely varied software vendor licensing methods — which often are designed to create confusion — and difficulties in determining what is being used within highly complex IT systems.

Successful SAM programs often achieve substantial return on investment results and dramatically decrease risk. For instance, via a SAM managed service program one agency was able to achieve $33 million savings on budget over a three-year period, and almost $20 million in cost avoidance. Overall, we have seen government clients save more than $500 million via SAM initiatives.

Marcus D’Castro is Executive General Manager for Capability and Consulting at ASG Group.

Image credit: ©stock.adobe.com/au/doucefleur

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