I represent a large telecommunications company with worldwide locations. How can I find someone to help me resist the temptation to SLASH my IT budget. WHo can help me prioritize spending. Any thoughts or help would be welcome.

Doug:

From a new applications standpoint, one thing that I have seen work, is to include your business application sponsors in the discussions. These would be the guys who have asked for new applications or upgrades. If you get them all in the same room and discussions, you can get help to prioritize on what key applications they need to have and what they can live without. Based on a consensus business criticality, you can allocate your spend dollars.

This could apply to large upgrades that are coming up as well, and for replacement of obsolete servers hosting key applications.

Another thing that might work, if these business sponsors can pony up the money from their budgets for these new apps/upgrades, then you are set. Those that cannot will be the ones that drop-off and give you a budget reduction option.

Hope that provides some food for thought.
Arvind B Kaushik

Understanding business value derived from IT investments, where and how IT is embedded in strategic initiatives, and prioritizing IT investments are all outcomes of IT Strategy and Governance. As the article states too many organizations still view IT merely as an expense line item rather than as a driver of business efficiency and effectiveness.

I would submit that only when proper IT Governance is in place can the management team effectively identify areas for reduction and/or increase in IT spending. This of course applies in either recessionary or expansionary times.

As suggested, the downturn is the best time to optimize what you have and what you want to achieve.
To ensure that you have proper optimization; I would only suggest to have/hire people who are good in Quality Management (Six Sigma, Taguchi or any other methodology that can be applicable to your business) and they would help you optimize the resources(human or machines) and these people can work for either the product domain, general operations or even the backoffice like IT for some companies.
IT is mosty driven by what customer wants; so one should be competent enough to understand as when the organization needs to upgrade its IT to newer standards / level or technology or it is the time to slash the over-expenditure being done on R & D by IT.

Doug,

By way of overview, We have a lot of experience in working with business and IT to focus on the services and necessary investments required to deliver on the business goals. There are many areas to discuss in positioning and communicating the message so that the financial aspects are considered with all information.

This includes the relevant Industry experience you are seeking.

Pls feel free to email if you want to discuss specific aspects further.

Doug

The need you describe is little to do with IT as such and much to do with how you run your business. Specifically, how do you implement your strategy, especially in tough economic conditions, and execute your business plan at the tactical/ operational level?

Once the business imperatives are clear, the degree to which IT spend is simply one of the key operational/ logistical enablers also becomes clearer.

Feel free to email if you would like to discuss.

Stephen Newton

Most of the time IT Is treated as 'cost of doing business'. Being cost, it becomes a natural target for any kind of pruning.

Investments in IT should be prioritized on basis of value they will add and returns that they will provide. The return will be on basis of either savings of costs (in purchasing, utilization of resources) or by way of additional revenue.

Opportunities of these value generation will be revealed by a well directed discussion / brain storming of stakeholders. Focus would be on ensuring that active / operations users have good visibility of opportunities or sufficient data for making effective / optimizing choices.

Size of these opportunities can be used to set priorities and follow through actions.

Send over an email if more details are required.

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Doug:

It is critical to understand in a quantitative way the value IT brings to the business and to establish that IT is being managed efficiantly. My paper on IT Governance, which can be found on the Thought Leadership page of our website (http://www.techpargroup.com/Thought_Leadership/whitepapers.html), can get you started.

Well spoken Howard and John. I would like to add that if cuts are made after a merger, where there is typically an increase in IT spend to integrate systems, that it is important to very carefully prune. Doing this with outside decision makers who don't know who the real contributors are, so it important to know your staff. Just knowing your dollars is not enough.

Adding consultants and contractors to help when the work is at its highest and can help minimize cuts, but i have seen targets as high as 40% that cut too deep too soon.

Emotions can run rampant and people can spend more time saving their jobs, for sometimes years, instead of dealing with the business at hand. Those who paid attention to keeping the business afloat then are not considered as they should have been.

It all goes back to your point about having the right people engaged. With the right staff, and with creative ideas, IT solutions can absolutely be the best answer to driving up market share or even just staying alive.

Many conpanies implement IT intiatives without regard for how it ties into their business model, their different departments, etc. If done in a piecemeal fashion, you have a lot of disparate systems that do not add value to the company, and hence look at being cut. This, of course, depends upon the size of the firm, industry, and how bad they are financially given the recessionary pressures. If you need to cut, and your boss tells you to, then you will have to cut. But when the good times come back, you might want to think about being smart about the IT investments, and make sure the senior management are on board so they see the value, and not just a bunch of hard drives and wires that cost them a lot of money.

I believe in order to find the right candidates for IT budget allocation, analysis of following matrix should be done

1. Time frame to avail benefits

If the gestation period for investments is large then such intitiatives should not be strangled since when the economy is bouncing back, the institutions which are future ready would ride the recovery wave. If the gestation period is fairly small then such investments can be put on the backburner.

2. Cost/Benefit Analysis -

Operational Benefit

Profit Margin Increase

Revenue Increase

Competitive sustenance

Scores should be given in above categories for each investment and then investments which score high on maintaing the revenue and competitive sustenance should given the prime place during economic downturns.

3. Is this an continuing expenditure -

If the initiative has been going on for some time and resources have already been allocated to the projects then, more care should be taken before taking out the resources from the initiative. This would ensure that small economic shocks do not wash out the past investments and employee morale.

Don't Cut IT During a Downturn
Posted by John Sviokla on February 13, 2008 6:54 AM
IT makes up 7% of the operating expenses in the average firm and up to 18% of the cost base in information-intensive industries such as financial services.
John, I admit your write up is a slightly short as the statistics you give is one sided.
Is IT not related to the many avenues of the working life? I mean before the IT we had many integrated twisted twining rules that bound us together, Research, as well as work done by Rubin Systems and Diamond Management, our companies, shows that businesses with well-targeted IT investments outperform their peers by 2-5% of gross profit. At the very time when profit is most dear, firms must keep their wits about them. Here you have the gross profit, look deeper with the overheads of the others and link these to the net profit, may be we will see that the human as asset is the biggest. This is the most overlooked element. The reason I state this is, the Silicon Valley that was booming in the California, had the Indian employees. Now in the Bangalore, India that is now the Silicon Valley we see this. From USA to India is a great leap. Is it IT or man?
So we cut the human factor and keep the IT as is? Is it not both that we need? After all men, work the IT.
I thank you
Firozali A. Mulla MBA PhD
P.O.Box 6044
Dar-Es-Salaam
Tanzania
East Africa