Anne Agee is living a dual life at work these days. On the one hand, like 75 per cent of Canadian and U.S. organizations, she’s preparing for a cut to her IT budget that could be as high as 9 per cent for the next fiscal year. On the other, she’s bracing for a boom in business.
Agee, vice provost for information technology and CIO at the University of Massachusetts Boston, is in a position that many IT managers find themselves these days — coping with the ongoing effects of a grinding recession while simultaneously being asked to get ready for a recovery.
In the case of UMass Boston, lawmakers are still deciding how much the state will cut its contribution to higher education, but the number could be devastating, a scenario for which Agee must prepare.
At the same time Agee has to ready her department for an influx in students, and related faculty hiring, as families shift from more expensive schools to in-state colleges.
Agee is using the downturn to eliminate sacred cows, like a long-standing remote-access modem pool that costs several thousand dollars a month in connection fees.
That will be replaced by an existing virtual private network (VPN), which will cost less and be more secure. She’s also pushing to eliminate fax machines, with the goal of putting in fax servers or related technology.
And she’s exploring whether she can replace individual desktop printers with centralized shared multifunction printers.
She’s already renegotiating vendor contracts, to reduce the risk of having to cut staff if she does have to whack her budget. Another hedge would be to close labs on weekends and slow certain technology purchases.
Agee is not the only IT manager having to plan for growth during a downturn.
We talked with several, and they offered these nuggets of wisdom:
1. Take care of your business partners
The downturn has given some IT managers a chance to slow down and take a look at what they’ve been racing around doing.
That’s the plan for Frank Lowery, IS director at Ebara International Corp. in Sparks, Nev., which makes liquid natural gas equipment.
While Ebara has had some layoffs, thanks to productivity gains achieved after installing a new ERP system, Lowery himself has neither had to lay anyone off nor cut his budget.
Still, business has slowed down, and he has used this time to examine how well projects were implemented, and to do future planning.
If we can make it easier for suppliers to do business with us, in the end it saves us money.
Frank Lowery, Ebara International
That’s led to refocusing resources from customer projects to ones that will help Ebara’s suppliers.
So instead of building a massive portal to share data with customers and suppliers, as Ebara had originally planned, it built a supplier portal only, with the customer piece on hold until later.
That might sound counterintuitive, but the firm builds its equipment to order, so putting off what suppliers needed was creating the potential for efficiency problems. “If we can make it easier for suppliers to do business with us, in the end it saves us money,” says Lowery.
By re-examining existing IT resources, Lowery also found a simpler way to build Ebara’s supplier portal.
His original plan was to buy new development tools and build a portal from scratch. But his department realized that it could use Oracle Application Express, bundled with its Oracle database.
That reduced licensing costs and also saved time — it took less than three months to build the supplier portal, versus the six months the team had originally allotted.
2. Don’t just reduce when you can reengineer
The downturn meant cutting more than 5 per cent of IT staff for Mark Settle, CIO at BMC Software. But there are some IT components that should not be chopped.
Yet it has managed to cut exactly none of its IT projects. It finished deploying a major rollout of Oracle HR and Finance in October, and in April started using Salesforce.com for sales activities like contact management and lead management.
BMC kept projects going in part by taking a hard look at employees’ responsibilities. Settle realized that cost-cutting over the years meant his senior developers and architects had gradually taken on operations and service tasks. Automating those tasks has now freed his senior-level staff to do senior-level work.
For example, about half of BMC’s IT employees are developers, who need new run-time environments for their code. These usually are built to custom specifications and take up to six weeks to create.
Because they’re specialized, they often create glitches that crash BMC’s server clusters, forcing reboots.
One of BMC’s automation engineers figured out that it cost the company $5,000 every time a server needed rebooting. He then figured out how to create a catalog of standard environments that could be made available to developers within two hours.
“We’ll still do custom work, but you’d be amazed how those [requests] melt away when they can get something in two hours,” says Settle. Also melted away are the server crashes.
3. Consider — or reconsider — outsourcing
With revenues crushed at many companies, even IT managers who avoided outsourcing in the past are being forced to consider anew whether there are non-essential services they can outsource. Applied Materials, a nano-manufacturing technology company, has used outsourcing to help it deal with the down cycles that hit the semiconductor industry like locusts, about once every seven years. It’s developed flexible service-level agreements that allow it to add or reduce people quickly.
That does not mean it avoids internal layoffs, “but they’re in the hundreds rather than the thousands,” says Ron Kifer, Applied Materials group vice president and CIO. He says that on the plus side, as soon as things show signs of turning around, he can quickly instruct his outsourcers to add personnel, and start using them for projects in the works.
Kifer says IT’s success in crafting such flexible outsourcing agreements has led other parts of the company to apply the same managed-services mantra.
For example, Applied Materials found it was employing financial analysts who were spending most of their time developing reports and aggregating data, tasks that could be done outside the firm, reducing costs by a third through lower headcount. The remaining financial analysts were then able to focus on more valuable work.
Even so, firms
should be careful not to do blanket outsourcing, says Jim Milde, a veteran CIO who is now executive vice president of global services at Keane Inc., an IT services firm.
“You never outsource your core customer-facing IT people who work with your business,” he says. Instead, consider outsourcing business analysts, call centers and some business process functions.
4. Spend strategically, finance creatively
TheUniversity of Northern Florida (UNF) won’t know its new IT budget until the state legislature signs off on the 2010 budget. But IT is already taking creative actions.
The school needed a communications infrastructure upgrade, says Stephen Lyon, the assistant director of network engineering at UNF, in Jacksonville, Fla. Lyon’s group had surveyed students and found that they come to college bringing not just computers, but game consoles, various handhelds and netbooks, all of which need their own IP addresses.
Meanwhile, various departments at the university were examining new embedded systems to manage things like sprinkler systems, parking permit dispensers, lights and elevators.
All of these help the university save money — in fact, water is one of its big expenses, and monitoring should yield dramatic savings for the school — but they too need bandwidth.
Lyon saw that multiple groups in the university had problems that could be solved with a 10 Gigabit Ethernet backbone and gigabit Ethernet to the desktop. It would also help IT do more with server virtualization, an important technology goal. Finally, he had his eye on 3Com equipment that would help IT respond more quickly to user requests.
Typically, the university coughs up cash for a big project in one fiscal year. But with the downturn obviously coming, Lyon in late 2008 proposed a four-year capital-expense payment plan. His argument: It would prevent the university from having to take a big one-time hit, and it would not affect the yearly operating budget. The end result is that the university, which approved the project, created wiggle room in its operating budget and its network.
For its part, Applied Materials actually increased spending on communications technology. In fact, it accelerated an ongoing videoconferencing project after the downturn struck, aiming to reduce travel costs without losing face-to-face contact with customers and suppliers.
Kifer says the technology is so good it’s almost like having in-person meetings, which creates a new model for doing business, even in an upturn. “We can reduce the travel budget without losing continuity and closeness with customers,” he says. BMC Software also has boosted spending on communications technology, upgrading its video gear and increasing bandwidth to make it easier to use video in instant messaging. “We’re investing in how to use these tools, because even if quality of the video is low, it somehow makes a conversation more meaningful,” says CIO Settle.
5. Hire a few good people
Good people are being let go by firms that either aren’t thinking clearly or have no choice but to cut muscle, says John Ciacchella, a principal at Deloitte Consulting’s San Jose, Calif. office.
That means there are talented people available who can work with both IT and business units, and companies need to go after these talents even if they’re cutting staff, Ciacchella says. It may mean an extra cut or two in some areas, he acknowledges. But hiring key people now automatically puts companies in a better position when the upturn comes.
Companies that are hiring are enjoying the bonanza of top-quality applicants. RightNow Technologies, a mid-sized Web applications vendor in Bozeman, Mt., has 30 open IT positions.
It’s invested in a recruiting management tool, Taleo, to help sift through hundreds of potential resumes. Its CIO, Laef Olson, says he and his top managers meet for an hour a week to go through candidates to fill senior-level networking jobs.
“Instead of looking for a guy with ‘Cisco training,’ I’m getting someone experienced with MPLS, Voice-over-Internet-protocol and quality-of-service in a single candidate. We’re raising the bar on talent,” Olson says.
6. Innovate to invigorate the bottom line
As with many other companies, the downturn has caused sharp declines in growth at Ebags.com, a Denver-based luggage and bag e-commerce site, and with it a cutback in expenses. The company had built a staff based on 30 per cent estimated growth rates, so anticipated flat sales meant big staff cuts, 17 out of 40 employees, including 35 per cent of its IT staff, says Peter Cobb, its senior vice president and co-founder.
Those that are left are putting their priorities into adding features that directly help customers find goods to purchase. So it’s doing things like letting people search by color, and adding new tags to the site, like “laptop bag,” for easier searching. It also used site analysis from Gomez Partners to figure out how to get page loads down from 1.5 seconds to 0.7 seconds.
Cobb says these priority shifts should put it in good stead when consumers begin buying again.
In the end, IT managers say, their priority is to not just endure the downturn, but be prepared for the recovery when it finally arrives. As UMass-Boston’s Agee says, “We’re lining up our strategic priorities for the university, and targeting our cuts as far away from them as possible.”
Michael Fitzgerald is a freelance writer based outside of Boston.