Businesses and government are willing to make risky IT cuts

Businesses and government departments are storing up problems in the future by cutting IT spending to meet recession driven targets, according to the latest research report from business management company Deloitte.

Businesses and government departments are storing up problems in the future by cutting IT spending to meet recession driven targets, according to the latest research report from business management company Deloitte.

Seventy three per cent of organisations surveyed are cutting IT costs, with another 10% planning to do so in the near future, Deloitte says.

Three quarters of those questioned would delay or cancel projects, and 67% would increase their use on out of date infrastructure.

"IT departments are scrambling to cut costs but are unwittingly storing up problems for the future," said Neville Howard, partner at Deloitte.

The problem is that cost reduction targets are decided by people with limited understanding of the costs, risks and issues associated with IT service delivery, he said.

"IT is reacting to business pressure by delivering short-term tactical savings that lack ambition, rather than driving long term benefit."

"Operational risk may not be the only consequence; there will also be pent-up demand for new investment that will need to be made when business conditions improve, creating a different set of challenges for those organisations that have cut back on their IT staff."

Howard said that businesses that sack IT staff to cut costs might struggle when the economy picks up because they will be seen in a negative light by people with IT skills.

"IT skills are scarce and organisations that have not retained the expertise they need may have a real challenges attracting new staff when markets strengthen, particularly if they have a hire and fire reputation," he said.

• Harvard Management, which manages the assets of Harvard University, published a list of common

mistakes businesses make during a recession. It said one major mistake is delaying decisions that will improve the long-term health of your company.

It recommends that businesses should focus on providing value rather than providing cost cutting opportunities to the business. "Don't shrink away from decisions that may be unpopular with investors and analysts over the short run, but make sure that you're able to show the value of those decisions."

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