Question

As an IT manager, it is imperative to know how well the company you work for is performing overall. This is especially important in order to ensure that the IT operations deliver on supporting the organizational vision and business strategy. Therefore, students will evaluate the factors involved in making the IT department a profit center, especially considering the market's current focus on analytics. First, conduct research to acquire the income statements (also referred to as profit and loss or P&L statements) of any two organizations that have a prominent IT department. Many examples of such organizations are highly publicized and can be located with a general online search for the list of "Fortune 500 companies." You may also utilize the income statements from your own company or a company where you have previously worked. If you decide to include the latter, please use anonymous references for your proposal submission and not include the name of the company. Once the income statements for the two organizations with a prominent IT department have been identified, complete a 250-500 word review with the following components: An analysis of the profitability of the company over various periods of time: monthly, quarterly, or annually. Include a description of the overall areas of success (profits) and any challenging areas (losses). A narrative description of the impact of the P&L on the IT department. Include the specific or potential factors involved in each organization's ability to generate revenue involving IT. A description of the potential methods for reducing IT expenses.

Answer 1

Thanks for posting your question here. Below is my answer in details.

Maintaining tight control over both fixed and variable expenses is an essential part of maximizing cash flow and profits in your business.

There are a variety of tactics business can employ to rein in expenses and prepare for unforeseen costs that crop up over the course of the year. My suggestions to better control expenses.

1. Make a plan

You need to evaluate where your business is now and where you want to take it in the future. A well thought-out road map is essential to properly forecast expenses (including IT) and provide for contingencies.

Incase if you intend to pursue a new market next year, you have to build the related expenses into your forecast.

2. Track expenses diligently

You have to understand your historic costs before planning for the future. This requires gathering data in an effective and efficient way.

Tracking your costs shouldn’t be an afterthought, it needs to be an integral part of your ongoing operations.

3. Benchmark against your industry

Establish metrics that are meaningful to your business and comparable to those used by other companies in your industry. “If you see you’re spending more in certain categories, then drill down, investigate why and take appropriate action to reduce those costs to industry norms.

4. Manage variable costs

Look at your company’s past variable expenses and calculate what percentage of sales they represent. Historic percentages provide both a good indictor of potential future costs and a benchmark to use in keeping those costs in line with selling activity.

5. Get tough on fixed costs

People tend to become complacent about fixed costs because they are generally recurrent and often reflect long-standing relationships with suppliers. But you should periodically test the market to see if you can get a better deal from competing suppliers.

Explore new technologies that may help your business improve efficiency, increase productivity and reduce costs. For example, many companies are now using cloud computing systems as opposed to in-house hardware that can be relatively expensive to buy and maintain.

7. Offer incentives to staff

Make people accountable for costs and establish appropriate rewards for employees who find ways to reduce expenses. This helps to create a zero waste culture within your organization. It also helps motivate staff members charged with implementing expense-reduction initiatives to stay on task and be creative.

If you are considering the above points you not only reduce IT expense but also expenses in other catergories like occupancy, compensation etc. IT sector is one area where you see cut-through competition in market. So adopt the latest technolgy which will not only increase your revenue but also helps to attract new customers.