Q: I need to save some money in this last quarter. What can I do without endangering the business?
A: In these “death by a thousand cuts” economic times, the mandate to save occurs more and more often. Since real productivity improvements are elusive in the short term, you need to set a savings target and go after the relatively easy stuff (not that doing so is easy to swallow), including travel, offsite meetings, unfilled open positions, favorable budget variances and such nonlabor expenses as software, upgrades and equipment purchases.
Next, focus on cutting projects and service levels. All projects without a strong business case should be halted or delayed. Contingent labor should be reduced. If you have turned some of your fixed costs to variable costs by outsourcing, it’s now time to renegotiate rates and markups, and determine how costs could change with varying usage levels and cycle times.
Q: What tasks should IT departments outsource, and what percentage of total IT dollars should be outsourced?
A: There is no one-size-fits-all answer to your question. Please see one of my previous columns, “The Dark Side of Outsourcing,” at www.cio.com/ printlinks, to review the areas that should not be outsourced. By keeping the important work in-house and outsourcing everything else, an IT department could outsource as much as 85 percent of its total dollars. In that scenario, however, total IT costs would probably be no lower than if a more measured approach to outsourcing were employed.
Q: How does the service-level-agreement (SLA) process tie in to budgeting? You mention technology standards, but what about processes for problem management and so on?
A: SLAs can be very effective during the budgeting process if (and only if) you can provide cost and pricing alternatives at different service levels. For example, I have one client in my coaching practice who provides a very high level of desk-side support at a high cost. It is his job to provide the information necessary for the business to determine the appropriate trade-offs between cost and quality.
Standard processes are an important cost management technique because they help improve quality and reduce cycle times. If benchmarking and Pareto analysis indicate subpar performance in a high-cost area, then process improvements are a good idea for cost management. But make sure you measure improvements and focus on changing a few things at a time. Otherwise, process improvement can become like “boiling the ocean.”