IT managers should now prepare to cut IT costs in preparation for an impending recession, says analyst Gartner.
IT organisations should not wait for an official declaration that a recession has begun before undertaking IT cost-cutting efforts, Gartner said. It said economic factors in the US have deteriorated to the point where action is required and the firm is advising US businesses to prepare for cutting IT costs.
Organisations based in other countries, where gross domestic product (GDP) growth is projected to grow less than 2% in 2008, are also advised to prepare for IT cost-cutting now.
"Last October, we published research recommending that organisations should prepare two IT budgets for 2008, the first reflecting guidance already provided by senior decision makers, and a second 'backup' budget assuming the need to cut costs in response to the arrival of a business slowdown," said Ken McGee, an analyst at Gartner.
"Since that time the factors we based the research on - such as GDP growth projections and expert predictions for the likelihood of a recession - have worsened to a degree that convinces us it is now time for clients to prepare for cutting IT costs," he said.
Gartner believes that as concerns increase for the near-term health of some of the world's largest economies, those responsible for IT budgets can expect to receive mandates from senior executives to cut IT costs as part of an enterprise-wide cost-cutting programme.
It recommends that organisations begin establishing ground rules for complying with such a cost-cutting mandate by following a six-step plan:
Step 1 - Do not wait for the cost-cutting mandate from management
History proves that many organisations wait many months after a start of a recession to be informed that the recession has begun. Gartner advocates preparing a cost-cutting team now rather than waiting for official notification.
Step 2 - Choose the best and brightest IT people for the team
Gartner recommends that top performers are assigned to lead IT cost-cutting programmes, and that all other duties from their day-to-day tasks are removed for the duration of the cost-cutting assignment. Year-end financial bonuses should be based exclusively on the amount of money the team saves in 2008.
Step 3 - Do not allow finger-pointing or second guessing
Cost-cutting teams need to assume that everything that was done in the past was the right thing to do at that time, and not dwell on earlier decisions. They should identify the target for cost-cutting, perform the appropriate action and move on.
Step 4 - Enlist an internal auditor as scorekeeper
If cost-cutting is to be accurately reflected in the IT and wider enterprise budget, then the appointment of a relatively senior accountant or auditor is crucial. The auditor's list of savings will also provide an official record of the team's performance.
Step 5 - Report results on a weekly basis
Senior management should not be kept guessing about the progress made on reducing costs. During tough economic times, the IT cost-cutting team should provide a weekly report that depicts savings achieved since the last weekly report, along with aggregate year-to-date savings.
Step 6 - Identify a liaison from the legal department
IT cost-cutting teams will almost certainly encounter legal issues pertaining to contractual obligations such as maintenance contracts and penalty clauses. Quick access to legal guidance will be invaluable so that all team members can quickly arrive at cost-cutting solutions without increasing the liability of the company.