by Chris Howard

How to Prioritize IT Spending During an Economic Recession

Nov 20, 20087 mins
BudgetingData CenterIT Leadership

Tips for IT cost-cutting--both big and small--including outsourcing, staffing, consolidation of data centers and storage and server virtualization.

As Caesar Augustus chastised generals who rushed into battle: Festina lente! (Make haste slowly!). In these confounding days, with banks collapsing around us, global markets spinning into oblivion, and the shadow of greed darkening the promise of capitalism, this admonition is good advice for us now. Translated into the realm of enterprise IT management, Caesar is telling us to hold up on projects, IT spending and staffing decisions, determine how far ahead we can see, avoid knee-jerk reactions, and take stock of what we have. Acting too quickly without sufficient rationale may expend precious resources in the wrong direction, inhibiting our ability to react when needed.

Even though some organizations will feel greater impact from the tightening economy than others will, this is a good time for all to assess IT spending choices.By continuing to invest wisely during a downturn, an organization strengthens its long-term future. Thanks to virtualization technology and outsourcing, there are some obvious “easy wins” in the data center. Collaboration technologies make it easier to be productive without being co-located. Deep within the IT infrastructure, cost can be contained by reducing the number of moving parts and redundancies. In addition, as people and partners move into, out of, and within an organization with greater frequency, well-designed identity management and other security controls for the virtual enterprise add considerable value.

Careful stewardship over existing assets and frugality concerning new investments is good policy—in both weak and strong economic times. Reduced spending doesn’t mean that IT has to stand still, but it will force a necessary examination of priorities./a>


Consolidating across and within data centers is at the top of the list for cost savings. Reducing the number of machines, and even the number of data centers, provides clear, quick bottom-line benefits. Consolidation initiatives usually begin with server virtualization and are now extending to storage virtualization. Burton Group believes that a new wave of client virtualization will soon follow, with greater flexibility, manageability, and cost savings than client virtualization scenarios of the past.

Outside the data center, consolidation can also be achieved by:

  • Reducing the number of vendors and suppliers, especially of overlapping technology and services.
  • Reducing the number of applications installed on users’ machines, especially if those applications are not core to the user’s job function. This will reduce licensing costs.
  • Examining and, where possible, renegotiating new enterprise agreements with major vendors to ensure that unnecessary fat is trimmed.
  • Reducing the number of redundant data sources (also related to data management).
  • Performing data de-duplication.
  • Reducing the amount of business process redundancy.

Consolidation efforts are most effective when undertaken within an overall portfolio management discipline. Portfolio management tracks and assesses existing applications and the demand for new functions, with the goal of rationalizing the set of applications to remove redundancies and maximize value.

Manage Your Data

Most organizations are inundated with data, with more flooding in every day. This exacerbates an already difficult problem: how to manage data and extract meaningful information from it. Users typically find ways around this by generating extracts, massaging data in secondary tools, proliferating copies, and sometimes “correcting” the copy so it disagrees with the original. Ever-increasing regulatory pressures force retention for compliance purposes, so data deprecation becomes an important consideration that impacts storage requirements. Reducing the number of data sources and de-duplicating the data in those sources will lead to fewer errors, greater efficiency, and reduced maintenance costs. Organizations should take advantage of advances in database management systems (DBMSs), which provide extended capability for managing and securing data, data analysis, and reporting.

Business intelligence (BI) is used to analyze and report on multiple data sources (both data at rest and in motion) to enhance business processes and inspire changes to the organization’s business model. Effective BI should keep the organization from missing opportunities for business innovation. In the heightened competitive pressure that accompanies a constricting economy, BI is a wise investment. Make sure you know what you desire to know, however; otherwise, what appears to be great data mining may tell you nothing at all.

Rent When It Makes Sense

Cost-sensitive organizations are taking a hard look at commodity—those functions and capabilities that add no competitive edge or value, but cost a lot to maintain—in their IT shops. Enter cloud computing and SaaS.

Cloud computing is best understood as “dumb” utility computing. That is, it provides compute power but without any business applications or processes provided by the hosting partner. SaaS, on the other hand, combines both external hosting with externally provided business processes and applications. is perhaps one of the best-known SaaS applications, although many others provide a host of common enterprise functions.

The rationale behind cloud computing and SaaS is this: It is cheaper to rent capabilities from a provider rather than to build, staff, and operate those capabilities within the enterprise.

As tools to manage dynamic computing in virtual environments improve, Burton Group expects that more organizations will eventually take advantage of moving load around within and outside their data centers in response to transaction requirements. Today, only about 25 percent of enterprises use virtualization. The benefit of highly dynamic resource allocation is that the organization pays only for what it uses. The more automated this allocation, the more cost savings can be realized.

Emphasize Business Capabilities

The more clearly an IT initiative supports a business capability, the better an investment it is. For many IT shops, effectively providing this support requires a shift in the conversation around IT away from purely technical details and toward the business contexts IT supports. For IT to remain relevant to the business and avoid slipping down the “IT as nothing but an expense” slope, IT staff must be able to advocate for investment in business terms. IT leaders must understand the investment requirements and map them onto required business capabilities.

Business capabilities are also subject to consolidation. The non-technical processes of the business domain must be rationalized in the same way as the applications and system functions within IT (i.e., using a portfolio management discipline). Over time, and especially in environments with merger and acquisition activities, redundancies across business capabilities will be introduced. It may not be desirable to consolidate all redundant business processes, but some level of normalization will lead to more efficient IT implementation. In the end, this will reduce cost.

Collaborate Without Collocation

New and improved tools for collaboration make it easier to reduce travel. From videoconferencing to sophisticated ubiquitous computing scenarios, users have more options for gathering virtually without loss of productivity.

Certainly, collocation is sometimes more effective, especially when concepts are very abstract, or there are significant human resources issues involved (i.e., don’t lay someone off via videoconference . . . bad idea). This may mean realignment of people and roles so that they are co-located and can easily participate face to face when needed.

For those teams that are co-located, it is worth stating the obvious. Don’t use conferencing and other tools designed for virtual team meetings when everyone is in the same building (that doesn’t happen does it?). There is a cost, both financial and social, associated with inappropriate use of these technologies.

Web 2.0 technologies are a great and relatively inexpensive way to encourage collaborative design and brainstorming. They (should) also make it easier to find out who knows what, especially when a team member is trying to solve a tough problem. Many organizations are experiencing higher productivity using Web 2.0 techniques. Blogs and wikis also enhance enterprise knowledge and should be indexed for search. If information is easier to find, it will be put to use more quickly.

Remember, collaboration is a human activity. Tools exist to support that activity, but will not create value on their own. In your organization, you may need to solve cultural and political issues before collaboration becomes a natural pursuit.