Large firms should make IT cuts to stave off recession, says consultant

Large firms should concentrate on making significant IT cuts to stave off the effects of a recession, says consultant The Hackett Group.

As the recession looms, said Hackett, many companies are reacting by mandating across the board cuts in key general and administrative (G&A) areas, such as IT, finance, HR and procurement.

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But Hackett research says firms should concentrate on making easier savings in IT, while "minimally affecting service delivery and the ability to provide strategic value".

According to Hackett, typical Global 1000 companies can generate £100m to £200m per year in savings through targeted G&A cuts, an amount that represents up to 45% of the potential decline in pre-tax profit due to a recession.

The cost reduction opportunities are focused in two primary areas. More than 40% of the potential savings, or up to £85.5m per year, can come from IT alone. And more than a third, or up to £72.5m per year can come from finance, said Hackett.

Hackett says large firms should focus on job cuts, reduced spending on technology and the selective globalisation of business processes in these two areas to achieve the necessary savings.

Loss-making Citigroup has announced £1.5bn cuts in IT over three years.

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