German IT users continue cutting costs to the bone

Times are tough for IT managers in Germany where an ailing economy has prompted numerous enterprises to slash costs for computer equipment and services. That was the unavoidable message at the two-day IT Meets Business conference, which opened Monday in Munich.

If users were expecting a pep talk from the conference’s kick-off speaker, Hans-Werner Sinn, president of the highly recognized Ifo market research institute and director of the Center for Economic Studies (CES), they were wrong. Sinn was blunt in his assessment of the German economy. “Industry is on the decline, banks are in a crisis and many companies are leaving the country,” he said. “In Europe, Germany is at the bottom in terms of economic growth, and a significant improvement is not in sight in the short term.”

What Sinn told IT executives in the packed conference auditorium “is the way it is,” said one German user. “We can’t close our eyes to reality.”

Against this background, IT managers of German companies are struggling to keep their systems running smoothly while pinching pennies wherever they can. “We are looking at every possible way to reduce costs and investment risks, as well as to increase productivity and contribute to corporate profitability,” said Thomas Tribius, chief information officer (CIO) of the large German publishing group Axel Springer Verlag AG.

Among the measures to improve its IT cost structure, Springer has unified computer systems across the publications in the group, including Bild Zeitung, Germany’s largest newspaper, according to Tribius. The company has also reduced the number of external suppliers and other technology partners from 80 to fewer than 30.

A big user of business software from SAP AG, Springer has teamed with another large German publisher and SAP user to benchmark the software’s performance, Tribius said.

Lowering IT costs is also a top priority at Switzerland’s Asea Brown Boveri Ltd. (ABB), whose second biggest market after the U.S. is Germany. “Last year, we reduced our infrastructure by 30 per cent, and the system didn’t break down,” said ABB’s Chief Operating Officer (COO) Alfred Spill. “Of course, we make sure that our servers are properly serviced and our global network infrastructure is secured, but where we can cut, we do.”

While cost-cutting appears to dominate the minds of many IT managers in Germany today, some analysts believe they shouldn’t over-emphasize it. “Everyone is talking about saving money,” said Lars Mieritz, an analyst with Gartner Inc. “For many, that means reducing the number of servers. That’s the easy part because servers are something they can easily chop and say, ‘hey, look at how I’ve reduced costs.”

A potentially much larger area for saving costs is optimizing processes, according to Mieritz. “If you can find ways to improve business processes through effective use of IT, you’re going to save far more money than you can by tossing out some computers,” he said. “The problem is, you can’t readily see this optimization because it’s a process and one that can take a year or two.”

Some IT service providers in Germany are already beginning to preach business process optimization. “One of the key messages we have for customers is that if they want to save money, we need to analyze their business processes,” said Bernd K

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