Cost cutting trend may hit IT industry “like a thunderbolt”

The cost-cutting phase of this economic downturn is coming, and when it does it may arrive like a thunderbolt, with force and immediacy, Gartner Inc. analysts warned at a conference in Las Vegas.

IT managers may get little time, a matter of weeks perhaps, to respond to directives from the chief financial officer or the CEO to reduce expenses, said Ellen Kitzis, an analyst at the Stamford, Conn.-based firm. And the actions that managers have to take “needs to be fast and decisive.”

Among those in the audience listening to the budget cutting warnings from Kitzis and other analysts, was Mike Lyon, assistant vice president for computer operations at the University of Illinois in Urbana-Champaign. By the end of the session, he had written several pages of notes.

Lyon said the top message is to “start now,” with plans for possible cuts. “CEOs are probably going to give us two weeks if we’re lucky to come up with a well thought out plan,” he said.

The theme of the Gartner conference, its Symposium ITexpo, is “emerging trends,” and while there are many sessions looking at the latest trends in outsourcing, software services, careers and other aspects of technology and business, one theme threading through this conference is the economic picture.

Gartner set the stage for this last week by announcing that IT growth rates in the U.S. had slowed from 3.1% last year, to 2.3% this year.

At one session, an analyst listed more than two dozen steps that IT managers can take to prepare for cost-cutting directives.

Some actions, such as freezing headcount, are predictable. But Kitzis also argued that it may be possible for companies to cut layers of management as they move to more collaborative models.

Flattening the organization, and learning to live with fewer managers because of hiring freezes and job openings, is something that Clint Hubbard, the CIO of the city of Albuquerque, is already dealing with.

But Hubbard said some steps, such as an increase in the number of direct reports to managers, will hurt. “I will get something less than what I’m use to, but that’s the only option,” he said, citing the economic pressures on the city.

Many of the more than two dozen suggestions made by Gartner analysts are probably familiar to many IT managers, such as controlling printing costs, power usage and increasing use of server virtualization.

Among the recommendations made by William Snyder, a software analyst, was to check invoices. He said terms and conditions negotiated by buyers for software may not be reflected in the agreement. If a software vendor is acquired, the new owner may automatically apply its standards without consulting the original agreement.

“Make sure you are getting charge the right price,” Snyder said. “This is a very simple and effective method for driving down your cost.”

Snyder also said businesses need to get rid of unused software products and modules, and make sure old products are retired when new ones are introduced. Asset management software tools can help businesses automate this process.When it comes to negotiations, customers who wait for quarter and year-end to negotiate may strike better deals, he said.

Although many companies are focused on buying “best of breed,” products, Snyder said “best of need” — a product that gets the job done, may be a better alternative. While technologists in an organization may have a strong affinity for best of breed, going for the cheaper option may save a job, he said.

Phillip Redman , an analyst covering networks and telecom, said businesses may want to use telecom expense management services to analyze expenses and get the best deal, and also root out problems such as “zero usage phones” that are no longer used but are still accruing monthly charges.

He said that could save an organization anywhere from 10% to 35% on its telecom costs.

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Jim Love, Chief Content Officer, IT World Canada

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