Following nine CIO transitions in two years, the organization needed stable leadership, stronger financial discipline and a clear technology strategy.
The leadership team was charged with navigating a complex, matrixed environment while overseeing a $38 million technology operating budget, a $12 million capital portfolio and an organization of 168 technology professionals.
Costs needed to be reduced while the company continued modernizing its technology environment and supporting business growth.
Cumulative technology cost reduction over three years
Reduction in technology costs
Labor overspend identified and addressed
Repeated leadership changes had created competing priorities, inconsistent financial assumptions and limited visibility into where technology resources were producing business value.
An analysis of the portfolio revealed a $3.5 million labor overspend and $2.8 million in expenses that had been incorrectly projected between capital and operating budgets.
The organization was also considering a new solution that was expected to reduce costs by 75%. However, the original projection did not fully account for existing contractual commitments or the organization’s HIPAA requirements.
The organization needed to correct its immediate financial issues, prevent additional unnecessary spending and establish a sustainable strategy for reducing technology costs.
The technology and finance leadership team conducted a detailed analysis of technology spending, resource allocation, business services and strategic initiatives.
The team restructured the portfolio to address the labor overspend and correct the capital and operating expense projections. It then developed a three-year, data-driven budget strategy that:
The team also evaluated the proposed solution associated with the projected 75% cost reduction. Its analysis demonstrated that existing contracts and HIPAA requirements would make the solution more expensive—not less.
Based on that analysis, leadership stopped the initiative before the solution was approved or purchased.
The strategy reduced technology costs by a cumulative $24 million over three years, representing a 35% reduction.
As part of the broader transformation, the organization:
The organization emerged with stronger financial discipline, a more scalable technology foundation and better visibility into the business value of its technology investments.
Rather than treating cost reduction as a short-term budget exercise, the leadership team used the turnaround to correct significant financial issues, prevent a costly investment and create a technology environment capable of supporting continued growth.
Facing Similar Technology Cost Pressures?
AAG helps executive teams understand where technology spending is creating value, where it is not and what should change next.
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