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  • Writer's pictureMatt Malcolm

Cost reduction in the Toolchain - A dirty thought...

Updated: Jul 26, 2023



Intro to 'Cost Reduction'


Cost reduction must be the most avoided but unavoidable phase for business. It gets people nervous. It makes the bums of even the most competent members of staff twitch. Let’s not beat about the bush. It absolutely should do that.

No matter how well dressed up, cost reduction will often be a painful process. It's sad for your business, for your staff, ffs, it's painful for you!

In a recent episode of 'Not Another Tooling Podcast episode', my co-host Austin Pierson and I talked about Cost Reduction from a tooling perspective. Find the full episode here, 'YouTube - Cost Reduction In the Toolchain'.



For this blog, I focus on preparing your mindset and approach to cost reduction into 5 key areas.


1. Reduction Goal “What needle needs to move”

Before disrupting the business, write your goals down on paper, keep them simple, and clarify them. What is your reduction goal?

Are we talking about a bottom-line figure ($), are we chopping heads and killing our service levels?

If you can narrow down the area you are targeting for your cost reduction, the exercise will be much easier.

  • Is it the product cost?

  • What about the service costs?

  • How about that pesky contingent labour costs?

  • Maybe it’s outright a head count reduction?

  • Perhaps it’s a broader TCO position you’re looking to improve?

Be honest, get it down on paper and make sure all the people that need to know what the reduction is are informed. Don’t hide it. You’ll only trip yourself up later down the line. It’s not worth it.

Make it visible to the right stakeholders and get to work.


2. Degradation decisions

Perhaps a bit premature, but you’ll need to make these decisions at some point, so why not address the elephant in the room before you start pulling the trigger?

What are you willing to degrade within your service to reduce costs?

“No, I want to reduce costs AND improve my level of service” Ho ho ho

This isn’t any fairy tale story where you can get away with reducing costs AND maintaining or improving your service; that rarely happens.


Don't get me wrong, it “is” possible over a longer timeframe to reduce costs and improve services. However, the hidden cost that your consultants won't advertise is the cost of getting it done.


So be transparent, avoid misleading the business and demonstrate you are in control by communicating what degradation to service is realistic and should be acceptable to reduce your costs. The typically oversimplified macro picture would claim to achieve both but try to avoid leading with that as your playbook, instead sell the journey and build confidence along the way.


3. The data doesn’t lie

This, for me, is a nirvana position to be in. But, when we get at it, we get at it. Take a look inside and look at all the data you have available at your disposal to help you in your cost-reduction exercise.

What data I hear you ask? ALL OF IT.


We live in the real world, so I recommend focusing on these data points:

  • Business & KPI data

  • What is the business trying to achieve and how well are the current KPIs performing?

  • Service Management / ITSM Data

  • Incidents, Requests, Change, Asset all of it. Turn it upside down and get busy with it.

  • Monitoring & Event Management Data

  • No matter how good or bad your assurance and monitoring stack is, it has a story to tell. Go and tell it.

  • Operational data

  • People/headcount costs

  • Service costs (both internal and external)

  • License entitlement (even the free stuff)

  • What are you paying for (or getting for free) that you can kill or double down on? (more to follow in point 5.)

4. Be inefficient


WTF do you mean by “be inefficient” I thought you were talking about cost reduction. Why would I be inefficient?

Unless your data is on point, and even if it is, getting close to the actual humans operating your services is a MUST.

Be inefficient. Sit on the shoulders of your analysts, engineers, admins, and devs. Understand what they are doing and how they are doing it.

Even with a well-documented process, you’d be surprised how far your actual operations veer from the documented process. This is sometimes good, but often it’s bad.

“Investing” the inefficient time at this stage will pay dividends further down the line.

The amount you can learn from doing the do with the guys and girls on the ground can paint a clear picture. Don’t shortcut this. BE INEFFICIENT!


5. Flex the Tech


Best till last? Perhaps. But it is and should rarely be the first area of focus. It’s often not the technology's fault so just leave it alone!! Get your house in order first before you start having some testing conversations with your beloved software vendors.

Now when I’m talking about flexing the tech, I’m not just talking about exploiting your tech stack. I’m talking exploit it, get rid of it, buy more of it and anything in between.

The important thing is this though. Don’t let the technology lead the activity (or a persuasive vendor). Line up your requirements with your existing (or aspirational) capability model. Nothing fancy here, we’re talking about an old-school spreadsheet capability matrix. Think about things like:

  1. What capabilities do we need to deliver as a business?

  2. Do we have the right technology in the estate to fulfil the capability requirements?

  3. Installed stuff

  4. Deployed stuff

  5. Licensed but not deployed stuff (check your software license entitlement ;-)

  6. Build your matrix out, and understand what your current products can deliver now, and in the latest releases.

  7. Understand your competency levels to deliver any tooling capability you have on or off the shelf.

  8. What are the complete TCOs for each of the tools?

Once you have this relatively simple, but badass spreadsheet in order, you can make some pretty bulletproof decisions on what tech you can flex, get rid of or even spend some cash on to help you achieve your cost reduction goals.


Summary

Right, Euston's next stop so I better wrap this up.

I’ve covered the approach and mindset I recommend adopting to prepare for the difficult cost-reduction phase. It’s not perfect but who says it needs to be, just get started.

The points above give you some direction. Important to note, there is often no need to bring in an expensive external consultancy to do this work for you. Who knows your estate better than you? Not those guys, you'll pay them £60k to spend 3 months learning names.

Watch the full episode of our cost reduction podcast and if still at that point, you don’t feel armed to reduce the f*7k out of your estate, drop us a DM or leave a comment, we're waiting for it and we’ll cover it in a future episode. I’ll end with this.

If you’re feeling pretty happy with yourself about a recent cost reduction exercise you’ve just gone through in your tooling space and would be happy to talk about it, come and join us for a live episode of #NotAnotherToolingPodcast. We’d be happy to have you. (show offs welcome)

Right, I really need to go now, the trains have been still for 3 minutes and the guy from Avanti is looking at me funny.

Matt





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