Pressure to Cut IT Costs

Forty percent of CIOs polled in a recent CIO Executive Council survey reported that they were under “very high” or “significant” pressure to cut costs.

Cutting costs. What a drag. Who got into IT—or any profession—in order to cut costs? (Except, perhaps, for a few weird accountants, bankers and CFOs.) Don’t the business guys know that IT drives innovation, and innovation drives success and competitive differentiation? Haven’t CIOs been told over and over that the CEO wants IT to contribute to the top line? And doesn’t this tired tune about cost cutting mitigate all that? Everyone knows you have to spend money to make money.

In the best of all possible worlds, everyone would raise a glass to IT and give it all the cash it needs to support the business. Unfortunately, this is not the best of all possible worlds; this is the real world. And in the real world of business, cutting costs is the most direct path toward profitability. At least for the next quarter.

It’s no use complaining. To quote Hyman Roth in The Godfather Part II, like it or not, “This is the business we’ve chosen.”

CIOs have to cut costs, but cutting rashly is not a long-term strategy for business success—or for the CIO’s job security. You need to do your trimming strategically so that the cuts produce sustainable value. If you play your cards right, the money you save might even come back to you to fund innovation.

In “Trimming for Dollars,” on Page 34, we introduce you to CIOs at companies both large and small who have learned to cut smart. Their rules include:

1. Don’t keep multiple systems. Getting rid of them reduces labor, licensing and hardware costs, and promotes efficiency and improved service.

2. Routinize the routine. Automate wherever and whenever possible. This is something IT has always been very good at, and it saves labor costs.

3. Examine service levels. Not everything needs to be maintained 24/7.

4. Only pay for what you use. Are you paying licensing fees on applications you no longer use? Bet you are. Bet you don’t even know that you are.

5. Get rid of old hardware. As United Technologies CIO John Doucette says, “Old stuff is evil.” It’s expensive to maintain and generates less value.

There are lots of other rules, tips, stories and wisdom in “Trimming for Dollars,” but I’m under “significant” pressure to reduce the number of words I use in these letters. Type ain’t free, ya know. And brevity has a demonstrable ROI.

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Copyright © 2006 IDG Communications, Inc.

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