Trimming your IT spending effectively

With the economy struggling and financial markets in a state of chaos, this is becoming a hard time to be an IT manager.

On every here’s-how-to-survive-the-recession list that Gartner Inc. analysts presented at the consulting firm’s Symposium/ITxpo 2008 conference in Orlando last week, the number one cost-reduction option for IT execs involved people in the form of hiring freezes, job cuts or flattening organizations by eliminating layers of management.

IT projects with high price tags and lengthy returns on investment may be a hard sell internally. Caution, not expansion, likely will be the business direction at many companies, affecting IT as well as other departments.

Storage projects may be an exception and IT managers can try to push back, even in hard-hit sectors of the economy, by demonstrating that tech investments can make a difference for their organizations from a business or financial standpoint.

For instance, state and local governments hurt by tax-revenue declines could expand their online self-service capabilities. That might be a good thing for IT managers and staffers, but a bad thing for, say, building department clerks.

There also is expected to be continued demand for business intelligence tools, to help users better understand every investment and every business risk . In addition, IT requirements may grow in ironic ways; for instance, if PC replacements scheduled for next year are put off because of economic concerns, help desk calls from users having problems with their systems likely will increase.

New technologies that can help companies avoid hardware upgrades and other capital-equipment costs, for instance, cloud-based software-as-a-service offerings or server virtualization software. Also may get serious attention even in these tough economic times.

SaaS is the direction that the University of Cincinnati is heading in on e-mail, according to Mark Young, the school’s infrastructure manager. Young said the university is close to signing an agreement with Microsoft Corp. to use the software vendor’s Exchange Labs hosted e-mail service instead of the Mirapoint Inc. e-mail system that it now runs internally.

Microsoft, which offers the Exchange Labs service to universities as part of its free Live@edu suite of collaboration tools, will take over some of the expense of providing e-mail to users at the university, such as storage costs.

Young said that will enable the school to reduce its spending on hardware and systems administration and free up IT staffers to work in other areas.

Switching to the Microsoft service was attractive partly because it promised to deliver immediate financial benefits, Young said. He added that as far as other IT initiatives go, the school plans to proceed cautiously, watch what other universities do and see “what works and what doesn’t work, what saves money and what doesn’t.”

Blair Mandryk, global IT manager at Haworth Inc., a Holland, Mich.-based maker of office furniture, had been looking to cut his technology costs long before the recent economic events began unfolding. For instance, he reduced 450 physical servers down to 100 boxes through the use of VMware Inc.’s virtualization software.

But nowadays, Mandryk said, IT managers also have to find ways to expand services to end users without necessarily being able to increase their tech budgets.

“The business is still expecting IT to deliver, so without having the money to do it, you have to find creative ways,” Mandryk said.

He predicted that SaaS “is going to be a huge trend,” partly as a result of the economic downturn. A year ago, Mandryk himself wouldn’t have considered SaaS. Six months ago, “probably yes,” he said ? and now, “absolutely.”

Since many companies are likely to put off IT upgrades until the economy improves, another strategy for coping with the downturn is to get the most out of what you already own.

Chris Mincay, an IT procurement manager at a grocery chain that he asked not be identified, said he’s looking at ways to make better use of the applications that he himself relies on as part of his job. “Sometimes, applications are so sophisticated that you only use a certain percentage of [their capabilities],” he said.

Scotty Bryan, CIO of the Kentucky Higher Education Assistance Authority in Frankfort, said he’s trying to trim IT costs wherever he can, a process that began earlier this year when the tightening of credit markets put a crimp in the student loan business.

According to Bryan, the authority’s IT department has been managing disks better to increase available storage capacity, getting rid of software modules that aren’t being used and shifting users to electronic documents to cut down on paper consumption. Job vacancies in IT aren’t being filled, and new purchases are being reviewed much more closely than before, he said.

Charles Everett, CIO of the Services Employees International Union in Washington, said he expects to be asked to help the union find ways to cut operating costs.

SaaS is an option, Everett said, although he isn’t sure that would cost less in the long term than continuing to run software in-house would. “I think [SaaS] is always going to be more pricy than doing it ourselves, but we will see,” he said. Everett also views increased IT automation as a potential cost-savings option.

Not everyone is cutting back. John Chambers , the CEO of Cisco Systems Inc., said during a Q&A keynote session at the Gartner conference that he plans to increase IT spending by 10 per cent at the networking vendor next year, no matter what happens to the economy.

Economic slowdowns can be used to “gain huge competitive advantage” by companies that see IT as “the enabler of business strategy,” Chambers said.

But in interviews with IT managers after his session, in an area on the conference’s trade-show floor where a few TV monitors were showing a CNN report on the latest Wall Street sell-off, it was impossible to find anyone as enthusiastic as Chambers was about the potential for moving ahead on IT investments in the face of the recession.

Opinions on the severity of the downturn’s impact on IT do vary by industry. IT managers in the auto industry, which is being squeezed by slow sales and the rising cost of raw materials, are largely in hunker-down mode, according to Symposium attendees.

Companies in the oil and gas industry might have more money to spend, although new projects are being carefully evaluated even there.

Harsh economic times may also make possible some IT actions that were off the table in flush times.

For instance, John McLatchey, an enterprise architecture planner at a health care company that he asked not be identified, said the thinking in his group is to try to push through changes that may have been politically difficult before, such as getting rid of legacy systems that are expensive to maintain. “Let’s use this as an opportunity,” he said.

IT managers likely will try to get better pricing deals from their vendors. And Miguel Gascon, CIO at Panama-based Global Bank Corp., is taking an even more basic step. Gascon said he plans to make invoice verification a priority within his IT department, to make sure that bills from vendors are correct and meet the terms of contracts.

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