Sustainable IT helps in Cost – Out Transformation
The current market condition is quite serious with trends of recession worldwide and numerous layoffs happening across the globe. In this turbulent situation, organizations need to be more focused and spend on things that will work. The traditional approaches will not work in this unforeseen situations.
On the other side, Sustainability is also becoming critical. With the rise of temperature, expectation of more heat waves leading to large number of Blackouts, how do we see our businesses run? As IT Practitioners we need to also do our bit and as Board Members we need to also focus on Sustainability, as countries have committed and IT Carbon Footprint is quite high and more so in non-manufacturing sectors.
Today Customers wants to know if the products / services being provided as Sustainable / Green. There is chance of losing to Competitors who are providing Sustainable / Green Products / Services. Employees have started to choose Green organizations over others.
Cost-out transformation refers to a strategic initiative undertaken by organizations to reduce costs and improve efficiency across various aspects of their operations. It involves implementing a comprehensive set of measures, methodologies, and processes to identify and eliminate unnecessary expenses, streamline workflows, and optimize resource allocation.
The goal of cost-out transformation is to achieve Sustainable cost reductions while maintaining or enhancing the quality of products or services. This initiative often requires a holistic approach that involves multiple functions and departments within an organization, including finance, operations, procurement, and human resources.
By integrating Sustainable IT practices into Cost-out Transformation initiatives, organizations can reduce operational costs, improve resource efficiency, and contribute to environmental stewardship. These practices not only drive financial savings but also enhance the organization’s reputation, attract environmentally conscious customers, and position the business for long-term sustainability and success.
Key elements of a cost-out transformation and Sustainability practices to improve are:
Cost analysis: Conducting a thorough assessment of the organization’s cost structure to identify areas of inefficiency, waste, or unnecessary expenditure. Value Stream Management with Lifecycle Assessment of the Value Streams and the Assets used in the Value Stream will help.
Process optimization: Streamlining and simplifying business processes to eliminate redundant steps, improve productivity, and reduce costs. Using approaches like DevSecOps, SRE, VSM helps in removing waste, increase capacity and deliver value faster.
Resource optimization: Analyzing resource allocation and utilization across the organization to identify opportunities for consolidation, reallocation, or reduction. Value Stream Management helps in better optimization along with Application Portfolio Rationalization.
Supply chain optimization: Optimizing the procurement and supply chain processes to improve supplier relationships, negotiate favourable contracts, and achieve cost savings. Sustainable Procurement and Sustainable Supply Chain helps along with Sustainable Finance.
Technology enablement: Leveraging technology solutions and automation to drive efficiency, reduce manual work, and eliminate redundant tasks. Increasing automation where it is beneficial and use of newer technology helps to achieve the objective.
Organizational restructuring: Evaluating the organizational structure and identifying opportunities to streamline roles and responsibilities, eliminate duplication, and improve collaboration. Moving from a Project to Product Approach and focus on Value Delivery is the key and the Common Shared Objective for all.
Cultural change: Promoting a cost-conscious mindset throughout the organization and fostering a culture of continuous improvement to sustain cost-out efforts. Awareness and Consciousness is required to be Resilient and Sustainable.
Performance metrics and monitoring: Establishing key performance indicators (KPIs) and monitoring mechanisms to track progress, measure savings, and ensure accountability. Setting up OKRs from the Board to the Value Stream Team level is important to have one common understanding.
Further, practicing Sustainable IT helps also in achieving the following and enables the Business to be Sustainable and thus help in being more cost-efficient.
Energy efficiency: Implementing energy-efficient practices and technologies can significantly reduce energy consumption and lower electricity bills, resulting in cost savings.
Server virtualization: Consolidating servers through virtualization reduces hardware costs, lowers energy consumption, and optimizes resource utilization, leading to cost savings.
Cloud computing: Adopting cloud services allows organizations to scale their IT infrastructure on-demand, reducing the need for costly on-premises hardware and maintenance.
Data center optimization: Optimizing data center operations, such as improving cooling systems and airflow management, can reduce energy consumption and associated costs. Equipment lifecycle management: Proper maintenance and extended lifespan of IT equipment through sustainable practices result in reduced replacement and upgrade costs.
Green procurement: Choosing energy-efficient and environmentally friendly IT equipment can reduce energy costs and decrease the total cost of ownership.
Paperless operations: Digitizing processes, implementing electronic documentation, and reducing paper usage save costs associated with printing, storage, and document management.
Remote work and telecommuting: Embracing remote work reduces office space requirements, utility expenses, and commuting costs, resulting in significant savings.
Waste reduction and recycling: Implementing proper recycling and waste management practices reduces waste disposal costs and potential regulatory fines. Proper IT Asset Disposition helps in being Sustainable and also get money back from proper disposition.
Sustainable printing practices: Enforcing double-sided printing, optimizing printer fleets, and reducing unnecessary printing lead to cost savings in paper, ink, and maintenance.
Green data storage: Implementing energy-efficient storage solutions reduces power consumption, cooling needs, and associated costs. Data is a big issue as today all data is stored online and not offline. There is also a lot of Duplication of data. Managing them and using them increases cost. Proper architecture and Application Portfolio Rationalization helps in being Sustainable and reducing cost.
Efficient cooling systems: Employing energy-efficient cooling technologies, such as free cooling or liquid cooling, can reduce energy usage and costs. This will need use of newer technology which are more energy efficient leading to cost reduction.
Power management: Implementing power management strategies, such as automated shut-offs or power-saving modes, minimizes energy waste and reduces costs. This reduces energy consumption and thus reduce the energy bills.
Lifecycle assessment: Conducting lifecycle assessments helps identify areas of improvement, optimize processes, and reduce costs throughout the IT infrastructure’s life cycle.
Government incentives: Taking advantage of tax incentives, grants, and subsidies for implementing sustainable IT practices can provide financial support and cost savings.
Funding: Now most of the funding organizations are putting more of their funds in Green Projects and Green Organizations. There are mandates coming from Regulatory bodies and Government in many places.
Overall, by being Sustainable we can reduce Cost and increase capacity. The older approach of being only “Cost Focused” is not relevant anymore .
The surveys show that organizations who are practicing sustainability are becoming more profitable. Here are some of the Survey / Study information on how organizations are gaining by practicing Sustainability:
- According to a survey by MIT Sloan Management Review and The Boston Consulting Group, 37% of companies practicing sustainability reported improved profitability, while only 20% of non-sustainable companies experienced the same level of improvement.
- A study conducted by Accenture found that 59% of CEOs believed sustainability initiatives had a positive impact on their company’s financial performance.
- The Carbon Disclosure Project (CDP) reported that companies with strong environmental performance had a 67% higher return on equity compared to companies with weak performance.
- A survey by Nielsen found that 66% of global consumers are willing to pay more for sustainable products, indicating the potential for increased profitability for companies offering sustainable options.
- In a survey by McKinsey & Company, 50% of executives reported that sustainability initiatives contributed to their company’s bottom line, either through cost reductions or revenue growth.
- The Dow Jones Sustainability Indices (DJSI) annual review consistently shows that companies included in the indices outperform their peers financially.
- A report by the World Business Council for Sustainable Development (WBCSD) revealed that 95% of companies incorporating sustainability into their business strategies experienced improved financial performance.
- The Harvard Business Review published a study showing that companies adopting sustainable practices enjoyed an 18% increase in stock price performance compared to their industry peers.
- A study by RobecoSAM and the University of Hamburg found that sustainability leaders had a lower cost of capital and a higher return on investment compared to their peers.
- A survey conducted by Deloitte revealed that 88% of executives believed sustainability efforts led to increased financial value for their organizations.
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