Top three consolidation considerations

IT departments have historically struggled with unnecessary complexities in managing existing systems as a result of duplicated assets and processes that achieve the same objectives.

Forrester Research analyst Alexander Peters says the only way out of this web of redundancy in the IT infrastructure is strategic consolidation.

"Duplicate infrastructures and application legacies from past decisions create cost, risk, overhead and friction - and erode IT's capacity to innovate and operate," wrote Peters in a recent research document entitled, Best Practices: Adopt the Discipline of Consolidation.

To maximize the real value from technology investments, he said, IT must keep its natural tendency for adding complexity under control.

Duplication in the organization exists in different areas, said Peters, including data, application management, organization functions and processes, which can all have an effect on IT's performance in the organization.

IT consolidation initiatives involve programs and projects carrying out a customized sequence based on three basic approaches, said Peters. The first one is standardization, which is aimed at simplifying management and reducing risks.

"Standardization is the tactic of making assets and processes look alike," said Peters. This approach would require upfront investments to replace non-standard application and systems, as well as to retain the staff.

Organizations that take the standardization route, however, typically see savings between three percent and seven percent of the baseline costs, said Peters.

The second approach involves physical relocation of assets to pool them together, said Peters. A typical example would be moving smaller data centers into one large facility.

The third approach is the elimination of redundant capabilities, such as hardware and software assets and duplicate staff functions.

This is the most difficult approach, according to Peters. "The longer duplicate capabilities are maintained without a business reason, the more painful and expensive are the change initiatives required to reduce them."

For instance, cost related to staff reduction as a result of eliminating duplicate functions, can be very high, he said. However, the savings to be realized from such an initiative can also be significant, Peters added.

According to Forrester estimates, fragmented IT organizations with immature processes can reach total cost savings of up to 25 percent of their baseline costs when they manage to consistently eliminate redundancies.

But reaping the rewards of consolidation comes at a price, said Peters, adding that capital investments are needed to implement standardization, relocation of assets and elimination of redundancies, which can reach up to 25 percent of the annual IT budget.

IT, therefore, needs to ensure that consolidation efforts streamline the delivery of services to the business functions for more value, Peter said. Change management processes should also be addressed as consolidation can create operational disruptions.

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