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Your IT Budget: When Cutting Costs, Look to the Future

If your IT budget must be cut, make sure you preserve your organization's muscle by retaining key positions and consulting with business users about project priorities.

 

June 10, 2008CIO

The economic slump has generated pain all around. If it hasn't kicked in for your organization, at some point it will. As we swing into the second half of the year, CIOs are scanning for opportunities to prune expenses. For those who anticipate being asked to cut their IT budgets between now and the end of the year, it's a good time to reflect on our past behavior.

The last time the economy soured, CIOs responded as if the sky were falling. In the ensuing panic, many CIOs cut too much of the wrong things. This time, you need to plan ahead to preserve your organization's ability to grow again when needed.

Then: The Destruction of IT Competency

Think back to the dotcom boom. Remember the Y2K spending hangovers, bloated organizations and data centers everywhere crowded with redundant equipment? IT shops amassed unused software and stacks of yet-to-be-read service and maintenance contracts. Pioneering infrastructure outsourcing deals designed to "save money" were launched with nary a baseline cost analysis. Travel was unconstrained, and everyone's stock was up.

When the bubble burst, IT organizations were sitting ducks. Spending was justifiably slashed—but without contingencies and little strategic thought about what would happen once growth began again. Vendors went out of business, venture capitalists stopped funding new ideas and IT R&D teams were disbanded—putting a damper on innovation. Meanwhile, service levels often plunged and enterprise know-how was pushed out the door without warning, as Just-Do-It outsourcing accelerated.

Finally, as a nasty side effect, IT lost its charm as a career for young people just as the average age in many organizations began to climb. In one large defense industry IT organization I am familiar with, the average of IT employees is older than 50. In a large manufacturing company, only the senior IT staffers are employees; instead, IT careers with the company must be launched and developed inside supplier organizations.

Now: Preserve the Future of IT

In this next wave of cutbacks, we can do better—now that we are armed with experience and hindsight. We know which cuts we made last time—like eliminating investment in R&D—weakened IT's ability to respond when business picked up and CIOs were expected to contribute to innovation.

Let's assume your organization is doing all the right stuff —consolidating servers, data centers, vendor licenses and maintenance agreements; deferring new purchases and outsourcing commodity services under contracts that really do save money.

 
 
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WHITE PAPERS

The Future of Financial Reporting

Finance and accounting executives must understand, adapt to, and manage the costs associated with changes: and doing so opens an opportunity to leverage this shift to better position their companies in the eyes of the investment community.
 

Reduce IT Costs to Achieve Better Business Results

A "Must Read" for CIOs, CFOs, and anyone involved in IT Budgeting.
 

Delivering Quality IT Services Through an Economic Downturn

Download this paper to discover the strategies CIOs are putting in place now and in the next five years to deliver quality IT services.
 

Improve Budgeting and Forecasting Accuracy

Learn how IT can better understand the fully-loaded cost of IT services and provide accurate, activity-based allocation policies.
 

The Convergence of IT and Facilities

If IT and Facilities could work collaboratively, organizations can operate more efficiently and effectively...
 

The Gartner Magic Quadrant for IT PPM Applications

This report evaluates 19 vendors on their ability to execute and completeness of vision.
 

WEBCASTS

Three IT Strategies You Need to Beat the Competition

Right now, your competitors are slashing their IT budgets - indiscriminately. Don't make hasty cost reductions. When the economy recovers, ensure your IT department is poised for growth.
 

Managing Client Systems in the Enterprise

Keeping client systems costs under control is just one of the many initiatives IT must address when trying to manag...
 

BMC Service Assurance Demo

What if you could predict disruptive IT events and automate their resolution -- all before they disrupt your busine...
 

BMC Service Automation Demo

BMC Service Automation automates repetitive, manual tasks (such as provisioning, patching and compliance) to reduce...
 

BMC Application Performance and Analytics: Predictive Intelligence in Action

See the highlights of BMC's Application Performance and Analytics; a predictive, resourceful and intelligent soluti...
 

Taking the Service Desk to the Next Level

Listen to this conversation with Doug Mueller to learn how standards and processes have evolved to bring us the ser...
 

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