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March 22, 2023
4 Min Read
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When an enterprise downsizes, IT is usually required to go along for the ride. For IT leaders, finding ways to maintain essential services with a reduced budget and fewer team members can be a daunting challenge.
The best way to downsize an IT department with minimal damage is taking a strategic approach to optimization, says David Lewis, a partner with global technology research and advisory firm ISG. Don't just focus on the low-hanging fruit, he advises.
Lewis suggests comparing your organization’s cost structure to similar bodies. “Understand the cost levers that exist in various cost categories and build a heat map of optimization opportunities.” He also recommends targeting short-term savings without losing sight of longer-term, bigger ticket items, such as technical debt reduction or application rationalization.
Look at Current Roles and Responsibilities
Rajan Ad, CEO and founder of digital media services provider Magical Media Studio, recommends addressing downsizing both strategically and proactively. “Start by identifying which positions or areas are no longer essential to the company's operations,” he says. Conduct a thorough analysis of your department's roles and responsibilities and assess the team's performance metrics. “This data will help you make informed decisions about which positions to eliminate or consolidate,” Ad notes.
An IT leader tasked with downsizing should also examine current services to identify areas that might be candidates for automation or outsourcing, advises Tom Kirkham, CEO and CISO of cybersecurity firm IronTech Security. “By streamlining processes and leveraging automation, enterprises may be able to reduce their IT department headcount without sacrificing quality of service,” he explains.
Other Approaches to Reducing Expenses
Offering team members telecommuting, job-sharing, or a four-day work week program can also help cut costs while simultaneously increasing engagement and morale, Kirkham says. “Additionally, providing employees with retraining opportunities and generous severance packages can help minimize the disruption caused by downsizing the IT department.”
Task segmentation is yet another option. To reduce expenses, many IT organizations are now opting to offload selected tasks to an external party, such as a vendor, observes Christopher Cain, threat research manager at OpenText Cybersecurity.
Maintaining and supporting existing tasks and operations is essential to ensure smooth, secure operations despite a downsized workforce. “Outsourcing non-essential services, such as website design, can help reduce costs without eroding technical capabilities,” Kirkham says.
Downsizing Strategies, Cost Optimization Tactics
Developing downsizing strategies and cost optimization tactics should only be undertaken with a senior level sponsor's support -- typically the CIO or CDO, Lewis recommends. He also recommends seeking input from leaders in finance, procurement, and other key business sectors, along with subject matter experts in each affected service area.
“By involving a diverse group of decision-makers, you can ensure that the downsizing plan is comprehensive and considers the broader implications for the company,” Magical Media Studio’s Ad notes.
Effective cost optimization requires aligning the downsizing program with overall enterprise goals. “This ensures there are no unnecessary cuts in strategic programs and that optimization focuses on non-strategic functions,” Lewis says.
Senior leaders should agree on which roles and functions should remain as strategic entities post-downsizing, as well as on a plan for executing the changes. “Human resources will be responsible for the separation and post-event communication,” says Steve Philips, senior director of managed services at enterprise technology consulting firm enVista. “Legal will be responsible for preparing for the adverse effects of downsizing, from human and facility impacts to company intellectual property protection.”
Limiting Business Disruption
The biggest mistake IT leaders make when downsizing is pulling the plug before building a comprehensive strategy. “You have to determine what day-one, post-downsize needs to look like to limit business disruption,” Phillips says.
It's also important to be realistic about downsizing's impact on operations. Reducing a team's size but not its workload, for instance, is a recipe for failure and could very likely lead to a cybersecurity incident simply by adding to existing volume and stress, Cain warns.
Poor communication can also make downsizing unnecessarily painful. “It's important to be transparent about any changes to operations, and to give employees the opportunity to ask questions and provide feedback,” Kirkham says. Layoffs create a huge amount of stress and uncertainty in the workplace, and leaders need to ensure that resources are in place for those affected by the changes. “Providing career transition or outplacement services, as well as offering personal counseling or other support as needed are key,” he explains.
Downsizing is a challenging process, but it can also be an opportunity for an organization to optimize its operations and increase efficiency. “By approaching the process proactively and involving key stakeholders in the planning, you can ensure that the IT department continues to support the company's goals and objectives,” Ad says.
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About the Author(s)
Technology Journalist & Author
John Edwards is a veteran business technology journalist. His work has appeared in The New York Times, The Washington Post, and numerous business and technology publications, including Computerworld, CFO Magazine, IBM Data Management Magazine, RFID Journal, and Electronic Design. He has also written columns for The Economist's Business Intelligence Unit and PricewaterhouseCoopers' Communications Direct. John has authored several books on business technology topics. His work began appearing online as early as 1983. Throughout the 1980s and 90s, he wrote daily news and feature articles for both the CompuServe and Prodigy online services. His "Behind the Screens" commentaries made him the world's first known professional blogger.
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