While most IT decision makers have put the axe to impersonal hardware and infrastructure expenses during this recession, staffing and IT service costs continue to be overlooked, according to a new Info-Tech Research Group Ltd. report.
Despite the seemingly endless barrage of layoff stories coming out of Silicon Valley, London, Ont.-based senior research analyst Jennifer Perrier-Knox found that staffing cuts have been a low priority for enterprise IT departments, with most organizations pledging to cut discretionary travel and training expenses instead of issuing layoffs.
Staffing costs typically comprise about 70 per cent of an IT department’s total budget, she added.
“It’s laudable, but in terms of the survival of the organization as a whole, they really need to look at staffing situations, staffing levels and costs,” Perrier-Knox said. “Because at the end of the day, IT writes cheques to two groups: staff and vendors.”
Cutting back on cheques to the vendors hasn’t been a problem, she added, with hardware cuts commonly seen in areas such as servers and storage, networks and telephony, and workstation and peripherals. With these infrastructure cuts, operations are becoming more streamlined and some staff members might see their workloads being reduced.
Even if your company doesn’t plan on conducting layoffs, “IT leaders should at least have a plan in place knowing who they would let go if they had to,” Perrier-Knox said. “Putting your head in the sand and ignoring this is not a good idea. It just increases risk factors and you might end up laying off the wrong people at a later on.”
Shifting full-time staff to contract work, temporary layoffs, and salary and hour reduction should also be considered when trying to meet payroll needs, she added.
In addition to trying to avoid uncomfortable staffing cuts, Perrier-Knox said that IT often overlooks changes that might require the CIO or IT director to engaging in a painful negotiation process with business leaders. These areas include application management and development, disaster recovery and end-user support.
“Cuts in these areas are less popular because they carry a high hassle factor,” she said.
If you’re going to do less maintenance on apps, you’ve got to negotiate that with the business and the end-users, Perrier-Knox said. “It could bring a decrease in application reliability and some functionality might not be added in.”
The same thing goes for disaster recovery and end-user service level agreements, she said. “You have to go back and renegotiate these objectives. For example, downtime could be longer for certain systems and some issues might get resolved in four hours as opposed to one hour.”
Negotiating these cuts could be difficult for IT decision makers who don’t have a strong relationship with business leaders, Perrier-Knox said. For CIOs and IT directors in this position, the only way to make these real changes is to “get brave” and make sure the proposed cuts support the organizations’ overall business strategy.
“In terms of current or proposed projects, you need to ask yourself, ‘Does this project advance our strategic objectives and goals?’” Perrier-Knox said. “If the project doesn’t help do that, then it should be cancelled or deferred — bottom line.”
Other overlooked cost-cutting areas include moving to vendor-approved second-hand gear, print management measures and application portfolio rationalization, she said.
