In an economic crisis, IT can help to reduce costs and increase efficiency, but companies have to revisit their IT organizational structures, consider strategic sourcing, telecom infrastructure and applications as well as prioritize projects, according to PricewaterhouseCoopers (PWC) partner Vilaiporn Taweelappontong.
Normally, IT departments cut their spending by aggressive headcount reduction, stopping large and expensive projects, moving into maintenance mode, deferring projects by six to 12 months and removing contractors.
But it is better to take a comprehensive look at spending in all IT areas and focus on more sustainable IT cost management.
The first thing is to assess the organizational structure by comparing IT resourcing levels against industry standards. In groups of companies, each may have separate IT departments. If they can consolidate these into one team this can help share IT services and increase negotiate power with vendors.
Second, consider using strategic sourcing by reviewing the effectiveness of existing outsourcing as well as balancing non-core IT services and insourcing IT services. Business has to consider which parts of IT are core and impact directly on their business.
For example, some enterprises may have different business intelligence (BI) vendors in different functions, but use only one report and cannot maximize the use of software that helps make business decisions fast and accurate. The big problem with under-utilization of BI software is data integration and cleaning data structures.
Thirdly, consider consolidation of suppliers for landline, mobile and data services, and consider opportunities for additional convergence technologies like VoIP and wireless technology. This, along with the next suggestion can yield immediate cost reductions. The fourth thing to do is assess all applications and conduct an asset inventory of all hardware and software. This can help reduce multiple vendors and system redundancies. Moreover, it will build IT standards and help technology optimization.
This also helps businesses find any illegal software that may have been installed by employees.
Fifthly, assess all current critical projects and their costs and benefits.
Prioritize projects by benchmarking how they will impact on a company's core business. Do not just look at total costs and cut the biggest first. The CIO should work with the board to revisit the company's IT strategy and IT structure to help make the business sustainable in the long term.
Normally an IT department should to revisit its strategy every three to five years, but in tough economic times such as these, it should do so much more often. She believes that in next two to three years IT strategy and IT architecture will increase in importance, especially in the telecoms and banking businesses which have complex IT systems.
"In tough times, IT has a key role to play. Eliminating IT staff is an easy and fast way to save money, but the knowledge of your IT people is not easy to replace, so businesses have to plan more carefully.
"If IT organizations do all of the five things suggested, they can reduce their costs, but how much they can save will depend on how complex of their IT systems," Vilaiporn concluded.
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