One of the world’s best-known technology research firms is calling them “worst practices,” but the ongoing demand for reduced operating expenses may force IT departments to take some drastic measures.
In a Webinar on Wednesday, Stamford, Conn.-based Gartner Inc. discussed “Emergency IT Cost-Cutting” in response to requests from clients about ways to prune their technology budgets. According to Kurt Potter, the Gartner analyst who hosted the Webinar, many organizations have yet to slash IT spending in a big way, and he said some have even seen modest increases. About two per cent of firms, however, have been coming to Gartner because they believe they have cut as close to the bone as they can, but they need more savings.
“We’ve having some very candid conversations,” Potter said. “When we enter into situations like we’re in now with declining revenue, economic uncertainty, you need to build competencies and disciplines around cost optimization.”
Potter said several emergency cost-cutting measures should be considered short-term and in some cases “extreme and dangerous.” These include cancelling or not renewing maintenance or warranty agreements, cancelling all training activities and allowing departments to create more siloed projects with point products rather than adopt standardized IT software and hardware.
Many of these tactics could come with side-effects, warned Potter. “You’re going to have poor service delivery. There may be business unit rebellion,” he said. “Creditors and IT vendors are going to sense you’re going through problems. It will send a signal to supply chain partners. You might see immediate demands for payment, your credit rating may change.”
Some cost-cutting approaches could lead to other savings, however. Cancelling training, for example, may suggest an atmosphere of austerity in an organization, which may precipitate voluntary turnover, Potter said. On the other hand, companies may want to watch how deeply they lay off staff, who may feel they have little to lose by suing for wrongful dismissal.
Clients have told Gartner their organizations can often survive with “mediocre” IT leadership for about two years. At the same time, Potter said some are making a concerted effort to identity those who work better with less oversight. “Companies are actively profiling staff who like the chaos because they can work on other things,” he said.
Some of Gartner’s less severe cost-cutting ideas include abandoning internal service level agreements. For example, IT departments that once promised users a new PC within a two-day period may now need to take two weeks. “You need to train staff to say no,” he said.
In other cases, it may be necessary to turn off automation where a staff-based process exists. Companies could also choose to purchase the cheapest IT available, or abandon best practices in lifecycle and asset management and extend the use of servers to four years or more.
Another option not mentioned on the Webinar is adopting emerging technologies. John Belgue, CIO and vice-president of commercial sales at natural gas supplier RiteRate.ca, said his company is too small for much belt-tightening. About six months ago, however, he moved from on-premise backup to online storage service MozyPro from Decho, an EMC company. Belgue said cloud-based storage has benefits beyond simple dollars and cents.
“I would say that looking at service level agreements and all those other things like reducing your footprint on server maintenance, I think everyone’s going to do that,” Belgue told CIO Canada in an interview. “For me (the real cost) is the amount of time I spend on a lot of these tasks. I want to spend time on things that make me effective and grow our business.”
Potter said it’s the firms who have been spending near the industry average or higher on IT that will be able to do the most cost-cutting. Gartner has been talking to global telecommunications firms who are reducing spending by 20 per cent, focusing on discretionary spending. Provincial governments, he said, are reducing storage costs, which in many cases make up 60 per cent of their IT budget. IT and consumer firms are implementing global chargeback standards and travel and leisure firms are pursuing ITIL certification to become more efficient.