The Paradigm Shift Toward Continuous IT Cost Optimization

In this first article of a three part series, William J. Leander, Senior Vice President, Santa Rosa Consulting discusses the paradigm shift, concepts and practical approaches associated with the shift toward continuous IT cost optimization (CITCO) – the art and science of fine-tuning IT spending to spend more on solutions that deliver value to your organization and less on systems that don’t produce results:

The Game Is Changing
Providers and payers are on the cusp of the most sweeping strategic overhaul in healthcare in many decades, and today’s CIOs are bracing for a new reality. Electronic medical records (EMRs) and health information exchanges (HIEs), while challenging, are minimal compared to the upheaval looming as healthcare migrates from “maximizing encounters” with fee-for-service reimbursements to “managing populations” with entirely value/risk-based payments.

Elevating IT cost optimization as an organizational priority and sustaining it well into the future is easier said than done, given that the very foundation beneath IT is being rewritten daily and steadily reinvented by internal and external demands. To achieve and maintain CITCO, stated simply, what worked yesterday does not work today.

As a result, successful C-suite leaders need to forge ahead with strategic innovation in an industry known for its entrenched inertia.  CIOs also face major challenges as they strive to establish adaptable and value laden IT environments that support business strategies and ultimate success.

New IT Management Mindset
As the game continues to change for healthcare, it also is dramatically changing for technology. Today’s IT environment has to be as adaptive as it is lean. So, what must change to achieve this profound shift?

IT cost optimization must become a continuous process, not a project.

Thought-leading CIOs are embracing and adopting this important paradigm shift to move IT from a resource sinkhole to a true catalyst for their business strategies. Their goal is to weave CITCO into the very fabric of management, thereby making it a daily endeavor rather than a periodic project. Success in this area requires a recalibrated view on the role of IT in healthcare, paired with a disciplined mindset to support that view.

CITCO is a mindset. If IT leaders focus entirely on periodic pruning of low hanging fruit, then those costs will find their way back with friends and relatives in no time. Optimizing IT while bolstering the agility needed to adapt to dynamic business strategies requires a far more systemic and repeatable discipline rooted in several key concepts.

Key Concepts of a New Foundation
There are four key concepts that work together to support the structure necessary for successful CITCO. These concepts align motivations while keeping CITCO feasible. Without these concepts, most IT environments simply cannot support CITCO – keeping it a “project with target” approach rather than part of a new managerial fabric. These four concepts are:

  • IT Simplification – Processes, portfolios, roles and more must be simplified. Many IT environments are heavily burdened by complexity and are major barriers to CITCO.
  • Service Levels – IT organizations should fully understand their service level agreements and analyze how these agreements can increase or reduce cost.
  • Cost Clarity – Similarly, the total cost of all IT activities and services must be revealed and considered. Many IT environments have “hidden” costs in contractors, outsourcing, etc. In addition, they may be encumbered by too many fixed costs (e.g., technology debt).
  • Demand Decisions – Today’s IT strategic planning must challenge the business case for every process, with a keen eye toward core competencies.

Santa Rosa Consulting works with CIOs to go after near-term opportunities when assisting with IT cost optimization. However, the ultimate goal and the more substantial results come from assessing and restructuring the environment for CITCO, enabling the benefits to be sustained and continuous improvements more readily realized. Learn more at www.santarosaconsulting.com.

The Opportunity
In the subsequent articles of this series, Pat Tikkanen, Director of Strategic Advisory Services for Santa Rosa Consulting, will elaborate on strategies for identifying IT optimization and cost efficiencies within organizations.