Recovery Ahead

It's not too soon to prepare your IT operation for better times ahead.

Anne Agee is living a dual life at work these days. On the one hand, she's facing the prospect of a deep cut in her IT budget. On the other, she's bracing for a boom in business.

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Agee, CIO at the University of Massachusetts Boston, is in a position that many IT managers find themselves in these days -- coping with the ongoing effects of a grinding recession while simultaneously being asked to get ready for a recovery.

At UMass Boston, Agee has to prepare for a possibly devastating budget cut cut while also readying her department for an influx of students, and related faculty hiring, as families shift from more expensive schools to state colleges.

Agee is using the downturn to eliminate sacred cows, such as 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, 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 needing to cut staff if she does have to whack her budget. Another hedge would be to close labs on weekends and delay certain technology purchases.

Agee isn't the only IT manager having to plan for growth during a downturn. We talked with several, and they offered the following nuggets of wisdom.

Take care of your business partners

The downturn has given some IT managers a chance to slow down and examine what they've been racing around doing. That's the case for Frank Lowery, IS director at Ebara International Corp., which makes liquid natural gas equipment in Sparks, Nev.

While Ebara has had some layoffs, Lowery himself has had to neither lay anyone off nor cut his budget. Still, business has slowed, so he's had the opportunity to evaluate past projects and look ahead.

That has led to a refocusing of resources, from customer projects to ones that will help Ebara's suppliers. 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 seem counterintuitive, but the company builds its equipment to order, so holding off on addressing suppliers' needs could create 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 Corp.'s Application Express, which was bundled with its Oracle database. That reduced licensing costs and also saved time: It took less than three months to build the supplier portal, rather than the six months the team had originally allotted.

Don't just reduce when you can re-engineer

For Mark Settle, CIO at BMC Software Inc., the downturn meant cutting more than 5% of the company's IT staff. Yet BMC has managed not to cut any of its IT projects. It finished deploying a major rollout of Oracle's HR and Finance software in October, and in April it started using Salesforce.com for sales activities like contact 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 had led his senior developers and architects to gradually take on operations and service tasks. Automating those tasks has freed his senior-level staffers to do more senior-level work.

For example, about half of BMC's IT employees are developers, who need new runtime 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 determined 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. The server crashes diminished as well.

Consider -- or reconsider -- outsourcing

With revenues crushed at many companies, even IT managers who avoided outsourcing in the past are being forced to consider it anew.

Applied Materials Inc., a nanomanufacturing technology company in Santa Clara, Calif., has used outsourcing to help it deal with the down cycles that hit the semiconductor industry about once every seven years. It has developed flexible service-level agreements that allow it to add or subtract employees quickly.

That doesn't mean it avoids internal layoffs, "but they're in the hundreds rather than the thousands," says CIO Ron Kifer. And as soon as business shows signs of turning around, he can quickly instruct his outsourcers to add personnel for projects that are 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 head count. 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 IT services firm Keane Inc. "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.

Spend strategically, finance creatively

The University of Northern Florida (UNF) won't know its new IT budget until the state legislature signs off on it for fiscal 2010. But IT has already been taking creative money-saving actions.

Stephen Lyon, assistant director of network engineering at UNF in Jacksonville, says his group surveyed students and found that they were bringing not just computers to campus, 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, but they too need bandwidth.

The school needed a communications infrastructure upgrade. 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.

Typically, the university coughs up cash in one fiscal year for a big project. 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 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, the videoconferences are comparable to in-person meetings; that has created 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 also 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 Settle.

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 in Deloitte Consulting's San Jose office.

That means there are talented people available who can work with both IT and business units. Companies need to go after such talent, even if they're reducing other staff, Ciacchella says. It may mean an extra cut or two in some areas, he acknowledges, but hiring key people now will automatically put a company in a better position when the upturn comes.

Businesses that are hiring are enjoying the bonanza of top-quality applicants. RightNow Technologies Inc., a midsize Web applications vendor in Bozeman, Mont., has 30 open IT positions. It has invested in a recruiting management tool from Taleo Corp. to help it sift through hundreds of r?sum?s. RightNow CIO Laef Olson says he and his top managers meet for an hour a week to evaluate candidates for senior-level networking jobs.

"Instead of looking for a guy with 'Cisco training,' I'm getting someone experienced with MPLS, voice over IP and quality-of-service in a single candidate. We're raising the bar on talent," Olson says.

Innovate to invigorate the bottom line

As is the case at so many other companies, the downturn has caused sharp declines in growth, and then a cutback in expenses, at Ebags Inc., an online retailer of luggage and bags.

The company had built a staff based on 30% estimated growth rates, so anticipated flat sales meant big staff cuts -- 17 out of 40 employees, including 35% of its IT staff, says Peter Cobb, senior vice president and co-founder of the Greenwood Village, Colo., firm.

Those who remain are focusing on adding features that directly help customers find goods to purchase. So Ebags is doing things like enabling customers to search by color and adding new tags to the site, like "laptop bag," for easier searching. It also used site analysis tools from Gomez Inc. to figure out how to get page loads down from 1.5 seconds to 0.7.

Cobb says these priority shifts should put the company in good stead when consumers begin buying again.

In the end, IT managers say their priority is to not just endure the downturn, but to 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."

Fitzgerald is a freelance writer based outside of Boston.

Computerworld 's print edition; it previously appeared onComputerworld.com.

This story, "Recovery Ahead" was originally published by Computerworld.

Copyright © 2009 IDG Communications, Inc.

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