Recession, a shrinking IT budget and the CIO

How can a CIO deal with reduced IT budgets? M D Agrawal, the deputy general manager of IS (refinery) at Bharat Petroleum Corporation Ltd., shares tips.

In today's economic scenario, how can CIOs get the best value out of shrinking IT budgets?

Although it may sound harsh, I would say that the CIO should stop spending. He should evaluate his existing assets, and then decide what he can

M D Agrawal
M D Agrawal

deliver using those assets. For example, assume that you have 20 servers, 25 databases, 30 applications and a staff of 25 programmers. Can you deliver the value that business requires with this staff without hardware investments?

Yes. This can be achieved with reengineering, re-staffing and staff rotation.

A CIO should also resist the tendency of unnecessary upgrades or migrations. Don't get carried away by what vendors suggest. For example, suppose I have a budget of Rs 5 crore. That budget should be used for extracting new value out of existing software. Instead, for most CIOs who have an ERP implemented, the effort is to go to the next version just for a couple of new features. In my opinion, you can implement add-ons which extract those values from the old system. If you have good programmers, this can be achieved. If business requirements absolutely demand a new version, definitely go in for it. Otherwise, the old system can be tweaked to get incremental functionality.

Be a bit more conservative on infrastructure investments, and try to use outsourcing as much as possible. If everything is in-house, you are not able to make 100% use of this investment. For example, most hardware runs on 25-30% of capacity, whereas 70-75% capacity goes waste. With outsourcing in place, you pay as per your usage. So you save on capital investments and running costs.

Can you give us some examples of the aspects that can be looked at for outsourcing?

Start from data center. You can look at managed services. Sometimes, if it's not a large operation, you can sign up for Software as a Service.

Common concern here is of security going out of your control. Always understand that it's a matter of governance. If proper governance is not in place for your IT setup, this can happen even in a new organization. So outsourcing is not necessarily the culprit.

 Be a bit more conservative on infrastructure investments, and try to use outsourcing as much as possible. If everything is in-house, you are not able to make 100% use of this investment.
M D Agrawal
deputy general manager of IS (refinery)Bharat Petroleum Corporation Ltd.

Should you renegotiate existing contracts?

There's no harm in trying. In my opinion, you have to create competition between your existing vendor and a competing new vendor. If you negotiate directly, he won't listen. So bring in a new vendor who quotes lower. This will make things easier.

How do you handle re-staffing and re-skilling?

Companies which believe in managing a large number of IT projects through their in-house staff definitely need to look at re-skilling. For example, I use a technique where I assign three technologies to a group, which has three to four people. One becomes the leader by virtue of his experience and role. The other two are the followers. After six months, I remove the first person and assign him to look after another area. The second person now assumes charge of the group. It's not like if someone is a Basis expert in SAP, he will retire as a Basis expert. I move them after three years.

Second is that I always create new challenges for my staff by putting them in charge of a new technology every year. So they gain new skill sets. Always ensure that they have an enjoyable experience. You have to see that they should find a career in the technology.

With IT budgets coming down, staff training has also come down. How do you cope with that?

Learning new skill sets does not happen with two weeks of classroom training. It should be on-the-job training.

For example, we had undertaken migration from Microsoft SharePoint Portal 2003 to Microsoft SharePoint Server 2007. The challenge was to migrate Hummingbird IDMS to SharePoint Server 2007. Now the staff member was not conversant with SharePoint Server 2007, but she mastered it and completed the migration in three months.

Now, I had the budgets for outsourcing, but the objective was to create a challenging opportunity for a team member. Today we are able to roll out the technology in other parts of our business. We'll also be saving at least Rs 50 lakh.

What about using cloud computing's touted benefits?

Yes, cloud computing will work, but not the way that vendors portray. Software as a Service will definitely work. Corporates can use cloud computing for their own group companies. For example, we have two associated refineries. Why should they invest in infrastructure that we already have?

So our sister concerns use part of my ERP -- the catalog management system. We've asked them not to buy any software and hardware. Our manpower manages their system, and we charge them a very nominal fee. Such efforts substantially reduce hardware and software costs.

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