Reducing Costs Within an IT Department: A Pragmatic Approach

Cost reduction regularly returns to the agenda of companies, whether to improve profitability, respond to a challenging economic environment, or support transformation initiatives.

For an IT department, however, cost reduction remains a constrained exercise. Technical debt requires maintaining a minimum level of investment that cannot be postponed indefinitely. Even by reprioritizing the project portfolio — an essential step regardless of whether cost reduction is targeted — significantly reducing CAPEX beyond a certain threshold remains difficult. In practice, cutting these investments to zero could expose the company to major technical and operational risks.

The effort therefore mainly focuses on the OPEX budget, which includes:

• IT department payroll costs
• The cost of projects delivered by external service providers
• Run costs (applications and infrastructure)
• Licensing and subscription costs, particularly managed Cloud platform services (PaaS, IaaS)
• General overhead expenses

Here, we focus on two approaches capable of generating sustainable or recurring cost reductions, across both OPEX and CAPEX: application portfolio rationalization and industrialization.

These two levers rely on the same foundation: analyzing the application and technology portfolio.

Three steps to regain control of your portfolio

The analysis of applications and technologies is generally structured into three stages:

1. Portfolio consolidation, to obtain a complete overview
2. Characterization of each application or technology
3. Analysis and benchmarking, to identify concrete optimization opportunities

At the end of this work, two categories of actions typically emerge:

• Rationalization initiatives: reducing and simplifying the application or technology landscape
• Outsourcing and industrialization of Build or Run activities: implementing more productive processes, achieving economies of scale, and transferring operations to lower-cost environments (cost-efficient locations, industrialized services)

The key: accurately characterizing applications and technologies

To reach actionable conclusions, characterization is the most critical step. It consists of gathering, for each application or technology, a set of information grouped into several categories:

1. General information and classification
2. Technical and architectural characteristics
3. Business characteristics
4. Lifecycle status
5. Cost data

In practice, around fifty attributes are needed to obtain a reliable and actionable view of the portfolio. Once established, this repository must be maintained regularly in order to support IT governance bodies such as Design Authorities or project portfolio management committees.

What the analysis reveals: a concrete example

To quickly understand the potential insights such a portfolio analysis can provide, let’s look at an example of a synthesized assessment.

Analyzing an application portfolio can sometimes reveal surprising findings. In the example above, functional redundancy appears relatively low, making it difficult to identify quick wins through application consolidation alone. However, this initial observation should not overshadow the main issue: the analysis must also consider business user satisfaction, which may be lacking for certain applications. This directly impacts project portfolio prioritization and should guide future initiatives.

At the same time, the technology layer stands out as a significant source of potential savings. The analysis highlights a proliferation of data exchange management solutions and diverse DATA-BI components, increasing implementation complexity, maintainability challenges, Total Cost of Ownership (TCO), and risks related to technical obsolescence. These become real “ticking time bombs,” ready to create major issues during incidents or architectural changes. This creates an opportunity to rationalize these components, even if doing so requires launching dedicated transformation projects. The resulting savings, however, will be both tangible and recurring.

The analysis also reveals abnormally high Run costs around Finance domain solutions, exceeding typical benchmarks. Two actions naturally emerge:

• Analyze the custom developments integrated into these solutions
• Reassess the current Run delivery model

These initiatives will ultimately lead to an industrialization roadmap covering not only incident management, but also the progressive evolution of the solutions themselves, simplifying the architecture and gradually increasing the level of standardization.

From analysis to decision-making

Following these analyses, a decision-making framework can be structured by comparing the cost of transformation initiatives against the expected gains and associated timelines.

This approach highlights one of the key responsibilities of the CIO: acting as the steward of the company’s application and technology assets, ensuring consistency, performance, and continuous cost optimization. At a time when uncertainty limits investment capacity, maintaining a strong optimization dynamic becomes more important than ever.

Jean-Bernard Guidt

*Micropole joined the Talan Group in October 2024.