IT leaders were told to "do more with less" even before economic woes exacerbated the issue. Savvy managers have always kept their eye on the goal: demonstrating what IT can do for the business, so that it's not always viewed as a cost center. Last week, one IT manager explained her strategy.

At a meeting of the Grand Rapids Association of IT Professionals ( AITP), Krischa Winright, associate VP of Priority Health, a health insurance products provider, demonstrated her IT team's accomplishments over the past year. Among the lessons learned: talented development organizations can gain advantages from frugality (including developing applications using internal resources and open-source technologies); you can ferociously negotiate costs with vendors; and virtualization can save the company money and team effort. End result: an estimated 12 percent reduction in expense spending (actual dollars spent) in 2008.

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I asked Krischa about what her team had done at Priority Health, and how other organizations might benefit from her approach.

CIO: First, could you describe your IT organization: its size and role?

Winright: Priority Health is a nationally recognized health insurance company based in Michigan. Our IT department has approximately 90 full time staff, whose sole objective is to support Priority Health's mission: to provide all people access to excellent and affordable health care. The implications of this mission for IT are to support cutting edge informatics strategies in the most efficient way possible. We staff all IT services and infrastructure functions, in addition to software development capability.

CIO: In your AITP talk, you mentioned basic prerequisites to transparency and alignment. Can you talk about those for a moment?

Winright: Prior to 2008, we put in place a Project Management Office with governance at the executive level. Our executive steering committee prioritized all resources in IT dedicated to large projects, which meant that we already were tightly, strategically aligned with the business. ROI for all new initiatives is calculated, and expenditures (IT and non-IT) are tracked.

CIO: So you put a good PMO in place to improve the organization's ability to trace costs. Then what?

Winright: Well, let's be careful. First, project costs associated with large business initiatives are only one portion of IT spending. Additionally, cutting costs is easy; you just decrease the services you offer the business.

Instead, we wanted to cut costs in ways that would enhance our business alignment, and increase (rather than decrease) the services we offer. To do that, we had to expose all of the costs in IT (PMO and non-PMO) in terms that the business could understand. In other words: business applications.

We enumerated all IT budgetary costs by application, and then bucketed them based upon whether they were (1) existing services (i.e. keeping the "true" IT lights on) or (2) new services being installed in 2008.

We then launched a theme of "convergence" in IT, which would allow us to converge to fewer technologies/applications that offer the business the same functionality, while increasing the level of service for each offering.

CIO: So you defined the cost of keeping the "true" IT lights on. What about new projects and development?

Winright: We adopted Forrester's MOOSE model. We established the goals of reducing the overall cost of MOOSE ("true" IT lights on) and increasing the amount of funding of items of strategic business importance.

Using the MOOSE framework, we finally understood the true, total cost of our business applications and our complete IT portfolio. This allowed us to quickly see opportunities for convergence and execute those plans. By establishing five work queues which spanned all of IT-Operations, Support, IT Improvement, PMO, Small Projects-we learned how all 90 of our staff were spending their time. That let us make adjustments to the project list to "converge" their time to items