Hidden hazards of cutting costs

There is a dearth of so-called “low hanging fruit” when it comes to squeezing enterprise IT costs. As our feature on balancing IT costs during the recession indicates, because IT departments were left lean and efficient after the dotcom crash, they have to be very smart about achieving further reductions.
Tools in the cost-cutting box include telecoms and asset management negotiation to get better deals, deferring investment, and increasing investment in virtualization software.
Driving cost out of software licensing requires tough and savvy negotiation strategies, and users are often at a disadvantage against much more experienced suppliers. A protracted refusal by the major software suppliers to reduce licensing costs might result in moves towards open source and software as a service. But a better approach is to increase buyer power by clubbing together more. However, too aggressive an approach to suppliers will just drive some out of business, to the overall detriment of the IT market.
Outsourcing and offshoring always offer the promise of driving out costs, but, as is reported in this issue, pushed too far they can become damaging to the health of IT in business. And so, Lloyds TSB management has expressed concerns internally that the increasing use of offshore IT services is reducing the ability to service business critical systems.
UK companies are, more generally, at risk of creating skills gaps in their IT leadership. Future business IT executives will not have the right skills unless they get exposure to development in the earlier phases of their careers.
Outsourcing and offshoring are valuable tools for business IT, and are a function of sophisticated business markets and globalisation. But, again, there is discernible in some of the developments we, and others, report on decreasing room for manoeuvre, and the necessity to be smarter.
Our feature on IT investment details some approaches that show how the right company with the right plan can still get funding for IT projects despite the recession. An intensified focus on cash flow, a turn to hosted products, and an alertness to the incubation, in this recsssion, of the high-growth companies of the future are in play, according to our roundtable experts.
Running up against limits is not the same as hitting the buffers. But IT does need to get cuter at the edges of what is possible until the economic context changes, and then sustain that.