Managing IT when the market contracts

We have by now all read advice from various experts about how we should react to the current economic climate. As with all good advice, it is the application of it that counts. During these times budgets and especially IT cost will come under increasing scrutiny.

We have by now all read advice from various experts about how we should react to the current economic climate. As with all good advice, it is the application of it that counts. During these times budgets and especially IT cost will come under increasing scrutiny.

By now most of us have sat in several board meetings with our colleagues creating multiple budget scenarios as we prioritise, cut initiatives and reduce headcount.

However, this is not as easy as it once was. As business have grown, IT has become more and more entrenched in key business operations. The wrong decision today can have dramatic consequences, jeopardising the organisation with either failure or impeded growth.

CIOs please stand up

This is a time for CIOs to come to the fore and begin to help lead their companies through lean times and out the other side, slicker and more efficient, with IT as the true business enabler. This is the perfect climate for dramatic business transformation.

Recognising that our organisations need to make informed choices requires us to challenge and redesign the investment framework and decision processes to provide accurate visibility, exposing all the relationships and dependencies between these aspects, and the overall change, cost and benefit landscape. We must, therefore, turn and look inwards, not just at our IT operation, but at the overall company operating models and core processes.

Having recently commenced such an exercise it was surprising and encouraging how receptive other departments were to this approach. By creating hybrid teams of business and IT experts with senior analysts, we ensured that both business and IT views were considered.

Teams were asked to evaluate current processes and indicate what the future processes would look like. They reported back on process revisions with a benefit case, which was reviewed for impact assessment and value. This led to increased automation of revised processes and structures, maximising gains in efficiency.

To manage this re-engineering you need to create the correct environment to facilitate rapid change. We revised our governance structure taking IT right to the heart of the business. This resulted in re-directing remaining budget rapidly to areas yielding highest benefit.

Although change is still tightly controlled, with the business fully engaged the change risk is far lower and the business understands exactly how to leverage change to maximum operational advantage. These changes reduce the cost of the business operation and IT work is beginning slowly to expand.

In the case of end-to-end process improvement, structures and practices may need to be changed to achieve maximum efficiency.

The majority of IT costs, usually between 60% and 75%, is "run cost". The problem is that much of this expenditure is not measured in business terms, which makes it difficult to communicate the impact of IT cuts on day-to-day operations.

We created a business service view of run, where metrics can be directly related to business activities, with IT costs depicted by transaction and type. We applied techniques such as virtualisation to drive infrastructure efficiency, but this is driven by the rate of permissible change dependent on the existing environments.

Apart from technology, the other run costs are licence and support contracts. By mapping our IT suppliers' lifecycle to a services plan we have been able to enter re-negotiation of contracts and services much sooner than before. This provides more time for our suppliers to adjust positively to our strategy and for us to better explore and understand the available market.

This is also a good time to negotiate better trading conditions and longer-term deals, as we understand suppliers' financial cycles and market place far more clearly. With greater supplier tracking we are able to zero in on supplier objectives, and yield significant savings.

IT suppliers are no different than the rest of us; they want to sustain business and retain clients during these turbulent times.

Preparing for the upturn

Organisations that are able to manage their way successfully through the downturn will be best placed to grow quickly as the economy recovers, and IT-enabled business transformation should play a vital part of the strategy for scaling back, while enabling low-cost rapid growth for the future. Tactical cost savings and efficiency must be balanced with making the right longer-term choices to maintain future flexibility, and ensure the most effective use is made of IT funds.

This is the time for clear decision and strong leadership. Technology is the major trump card in most organisations towards attaining survival and future growth. This is the CIOs' prime time to excel: take full advantage of it.

Iain Patterson is CIO for the Olympic Delivery Authority

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