CIOs sometimes feel that they’ve been given a “Mission Impossible” – to do more for their companies while spending less. But some information technology executives are promising to do just that this year, saying they’ll step up investments in strategic projects such as e-commerce while reducing costs overall.
Saving some money will be as simple as falling off a log. Costs associated with the year 2000 problem will just go away. But other cost savings will be won only by hard work. “We have been fighting for the elusive [software] reuse concept for years,” said Tsvi Gal, chief technology officer at Merrill Lynch & Co. in New York. “We achieved quite a lot [in 1999], and we expect to achieve much more [this] year.”
It seems there is plenty of fat to be trimmed in IT budgets. According to Meta Group Inc. in Stamford, Conn., US$82 billion in worldwide IT spending last year was “wasted, severely underutilized, poorly implemented or ineffectively deployed,” and that waste will rise to US$90 billion this year.
And in a recent Computerworld U.S. survey of 101 IT managers at mid-size and large companies, half the respondents said their budgets would rise this year. One-third said their spending plans would stay the same and 17 per cent said they would fall. For those saying budgets would shrink, the average decline was 22 per cent.
The area most-targeted for cuts is spending on consultants and contract labour, with one-third of survey respondents – even those predicting bigger budgets overall – saying they would cut back in that area. They said that, on average, they had devoted 23 per cent of their IT staffs, including contractors, to the Y2K effort in 1999, and that number will plummet to six per cent this year.
Dick Hudson, CIO at Global Marine Inc. in Houston, said he’ll cut spending about 10 per cent, or “six figures on a seven-figure IT budget.” About 80 per cent of that will come from eliminating Y2K consultants who will no longer be needed. The balance of the savings will come from reduced overseas travel for IT staff as a result of a new teleconferencing system.
“Our trips to Europe will be cut dramatically,” Hudson said. “When we put in new systems, instead of sending my people over there for three or four days of hand-holding, we’ll have a series of videoconferences.” Other departments at the offshore drilling company will see savings as well, he noted.
Hudson said capital investments in some other new applications will also have quick payoffs. For example, a new purchasing system that includes a supplier-accessible extranet will give Global Marine purchasing employees 30 per cent to 60 per cent gains in efficiency. “In our tests, we are seeing some monster productivity enhancements,” he said.
And despite a “significantly increasing” budget for e-commerce, CompUSA Inc.’s seven-figure IT budget will remain basically unchanged this year.
The secret for holding down the cost of IT is to outsource much of it, said Honorio Padron, CIO at the Dallas-based computer retail chain. CompUSA has turned over data center operations, application development and basic support for the implementation of its enterprise resource planning (ERP) system to IBM.