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Cutting IT Costs: Dos, Don'ts And Best Practices

These days, many companies are looking to slash their technology budgets any way they can. A new report from Info-Tech Research shows you how to do it the right way, without adversely affecting morale or operations. And the folks at bMighty.com -- InformationWeek's sister site for small and midsize companies -- have arranged to let you download this $2,000 report, FREE!

The Info-Tech report comes in the form of a unique, 71-page PowerPoint presentation, based on research with more than 150 companies, complete with case studies.

Surprisingly, according to the report, economic conditions are not the key reasons companies look to trim IT spending. While half of all organizations feel that 2008 conditions are negatively affecting them, only 1 in 5 organizations are responding by reducing IT budgets more than 5%. Instead, "While negative economic and organizational conditions are frequent reasons for cost reduction, IT's efforts to cut costs proactively is the most common one."

And IT often makes a proportionally larger sacrifice, the report finds: "Compared to the rest of the organization, 60% of IT departments make a larger contribution to cost reduction efforts."

More important, the report assesses the various ways companies can approach the problem, and the possible ramifications of each approach:

Vendor & Outsourcer Management: The most successful area to cut costs, with the fewest negative effects on morale, IT operations, and the business.

Staffing & Salaries: Changes in this area may work, but can hurt morale and IT operations. To maximize the savings while minimizing the damage, "improve utilization, invest in staff training (even in the midst of cutbacks), and reward performance, even it has to be via nonmonetary bonuses, such as flex time.

Project Portfolio Management (PPM): Minimal negative impact, but equally limited potential for major, ongoing cost reductions. To make the most of PPM, Info-Tech recommends "formalization, centralization, and communication."

Discretionary Spending: Risky –- cuts here often have negative impacts on stakeholder morale, IT operations, and the business -- and unlikely to produce the expected level of savings. Mitigate these challenges through "careful changes, central approvals, and transparent communication."

In addition, motivation and demographic factors influence both the gains and the pains of cost reductions. And there are often unexpected consequences. For example, "use of contractors and consultants temporarily increased for some organizations due to layoffs and hiring freezes, which decreased long-term cost savings."

The bottom line is that "best practices in vendor and outsourcer management produce the most success in cost reduction. Here's a quick list:

To get the whole story, download the free report.

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