Like many of my peers in IT, I am under pressure to contain costs
at the moment. Can the members of the panel give me three easy wins
that I can put in motion straight away?
Roger Marshall, Elite
It is difficult to give a concise answer which does not merely
restate what you already know. Much will depend on where you are
starting from and how much action has been taken in the past to
contain costs.
One good starting point is to consider what is different about the
IT business today compared with a year ago. Some parts of the
industry are suffering a severe down-turn in business and resources
are no longer scarce. In other areas, technology has marched on and
price/performance ratios have changed.
For years many of us have hired contract staff simply because we
were unable to recruit people with the right skills. Do you still
have expensive contractors meeting long-term requirements which
could now be converted into in-house posts?
Another thing that has changed is the cost of capital - interest
rates are very low at present. Are there opportunities to
re-finance leases or to turn rental arrangements into one-off
capital payments? Obviously you will want to be sure that you are
not at the same time increasing your risk from company failure, so
get appropriate legal and finance advice.
Examine all existing support and maintenance agreements. You have
probably got some relatively old kit which is costing more to
maintain than it would to buy a modern replacement. Do you have
maintenance and support agreements which are simply no longer
necessary?
Likewise you may be renting telecoms lines where there are now
cheaper and better alternatives available.
Roger Elvin, Cranfield School of Management
If your budget is anything like the ones I used to manage, you have
very little in the way of discretionary spend.
Three common responses to budget pressure are:
- To take out the "padding" that you put in your budget as a
negotiating ploy
- To kill all projects that do not have a compelling business
case. Most organisations that we work with have current project
lists that far exceed the capacity of the IT and business resources
available to them
- To cut back on contractors, consultants and staff
training.
Although these are common responses to the call for budget
cutbacks, I would only recommend the second. Focusing resources on
the relatively small number of projects that will have a
significant business impact is good practice even when times are
good and becomes critical when budget are under pressure.
A more productive approach, particularly with regard to the
operational side of your budget, is to reframe it so that you can
put a cost on each service you provide to your organisation. You
can then point out to your business colleagues that there is a
direct relationship between service quality and cost.
If your organisation genuinely needs to reduce cost then it has to
decide which services it does not need or where it can accept a
lower quality of service. They may not like being brought into the
loop but at least you are in with a fighting chance of engaging in
a constructive debate about IT costs.
While the cost of service is invisible to your business colleagues,
it remains your problem solely.
Christopher Young, The Impact Programme
Knowing little about your specific situation, I would suggest that
you should not look purely at cost but also at value.
There are some basic principles to follow:
- Understand the value that the business is deriving from the
expenditure - by understanding where you are delivering benefits,
you will ensure that you economise in the right areas
- Know what percentage of your budget is spent on what - look for
savings in the larger expenditure areas
- Approach the business colleagues with suggestions about how
they could get more out of the existing IT systems and
infrastructure.
In terms of easy wins, I would concentrate on three key
areas:
- Fundamental infrastructure - this adds little to the business
but is a requirement for providing services. Re-assess your
requirements and, where possible, renegotiate contracts. It may
also be worth considering outsourcing some functions. When
negotiating, remember that the IT supply industry is going through
tough times as well and those with high capital costs need volume.
They therefore want your business
- Projects - re-evaluate with the business any projects which
involve your resources. Are the requirements still there? Is the
project going to deliver the promised benefits? Can the deadlines
be lengthened and the resources reduced? Remember, 78% of strategic
IT investments fail to deliver the benefits promised
- Consultants - reduce the number of consultants that you use.
This can be done by spreading project time-lines and ensuring that
all your full-time resources are being fully utilised. You may need
to train your permanent staff to undertake some of these roles but
it should be cheaper in the long run.
Focus on delivering business benefits not just on cutting costs. If
you can find ways of helping your colleagues to increase loyalty,
enhance service or get more out of what they already have you will
be doing a better job than the person who simply reduces
costs.
Roger Rawlinson, The NCC Group
This may sound like an odd question, but do you know why there is
pressure to reduce costs in IT? Does your organisation fully
understand the role of IT and what benefits it delivers now, and
have a strategy to enable future growth and development?
Are you confident that you deliver real benefit so that you can
justify the cost?
Three areas that I would look at are:
- Standardise for economies of scale, such as standard builds,
configuration and procurement of hardware including PCs, printers
and consumables
- Convergence, such as network servers and applications - could
one "big box" replace a multitude of servers around your
organisation? Eliminate non-standard platforms and limit tool
suites
- Review management and support processes. Are you implementing
remote support for your applications and systems? Review the
current projects, are they all required? Benchmark your management
processes.
In order to reduce costs over the long term it is likely that some
up-front, one-off investments would be required.
One final thought: is IT "paying" for any services that should be
bought by other departments? This may not help the bottom line, but
would enable true costs to be understood.