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By Judy Mottl
When CIOs are faced with cutting costs and reducing budgets, there has been a tendency to slash staff as it's a quick way to stem spend.
But that's not the strategy tech leaders are taking in this recession environment, according to one industry analyst.
"Most CIOs are reducing the amount of external resources they use and cutting back on capital expenditures [CAPEX] such as hardware and software," says Mark P. McDonald, group vice president of executive programs at research firm Gartner.
"This is something that is really different from 2002 when IT leaders cut back on staff and investment projects," McDonald says. "This year the demand for IT services has remained high and CIOs are using that demand as a basis to retain staff."
Instead CIOs are employing a variety of strategies to trim costs. The to-do list includes reducing services costs, streamlining business processes and taking a long, hard look at architecture, applications use and legacy system costs.
A Forrester Research report released in March also notes cost reductions can be realized by advancing automation, assessing vendor service levels and re-evaluating projects to ensure that projects with the fastest return-on-investment are at the forefront.
The report, written by vice president and principal analyst Marc Cecere, states a good first cost reduction step for CIOs is revising IT roles to drive greater budget ownership.
"Today's economy requires most IT organizations to reduce costs. Ironically, the roles most essential to this process are also viewed as overhead," explains Cecere.
"Several strategic roles, including architecture, vendor management, and relationship management provide the mechanisms for reducing costs, but because they don't build or maintain systems, they are viewed as expendable, rather than as enablers of savings," Cecere adds.
Tech leaders can start by reviewing the roles of architects, planners and vendor relationship managers, says Cecere.
"CIOs should assess these functions in light of the need to drive cost reductions by managing business demand, changing how projects are prioritized and executed, and optimizing vendor contracts across IT," notes the analyst, explaining that the initial 'scope and authority' of these roles were likely set at a time when budgets weren't so crunched.
According to Forrester, 50 percent of IT leaders are assessing the IT infrastructure this year to save costs, while 39 percent polled are revamping projects to boost ROI. Nearly half of those surveyed, 46 percent, are considering investing in automation to drive down costs and 42 percent plan to retire older systems to reduce spend on legacy support and management.
That legacy cleanup effort, according to Gartner's McDonald, should be a priority as it's often overlooked as a viable cost cutting option.
"Most organizations do not do 'end of life' for applications and do not remove the old stuff. Whenever you remove an old application you not only free up resources, but you also increase the value of the information in the remaining systems," McDonald explains. "You do not need experts to retire applications, but every retirement lowers your cost structure," he adds.
McDonald also advises CIOs to reduce reliance on staff consultants and consider delaying hardware and systems software upgrades. It's also a good time to renegotiate contracts, according to the analyst.
"What CIOs need to do is to recognize that in a tight environment they must be focusing on "first things faster" which means that rather than running multiple initiatives IT leaders should be working to deliver the top priority as fast as possible."
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Mark McDonald
Marc Cecere
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