During an economic downturn, the impact of good
governance of information technology is magnified.
CFOs managing IT under current conditions would
benefit from keeping these action items in focus.
Monitor the progress of the actual IT budget
compared to the approved budget. Beware
of variances, such as planned cost reductions not
achieved on schedule and cost-saving milestones missed
or at risk of being missed.
Examine your portfolio of IT projects,
realizing that the business forecast may
have looked very different when the budget was planned
and approved. Rebalance, as appropriate, the mix of
business growth versus cost reduction projects.
Re-examine projects that didn’t make the current
budget. Dig out the most recent IT strategic plan and
review it for cost-cutting ideas that were low
priorities when the economy was growing. These ideas
and projects may make more sense now.
Recast IT spending into fixed and variable
expenses. The effort will be worth
the trouble. When faced with a required budget cut,
slash IT operations and maintenance expenses to the
maximum extent possible to preserve value-added IT
enhancement and new development dollars. Avoid
excessive cuts of subject matter experts. An
organization can get by with fewer hands-off managers
during periods of reduced IT activity. Hands-on
expertise, especially in application development and
business analysis, will be invaluable during a
recession and the subsequent recovery.
Get IT outsourcing right. This
can make all the difference in a downturn. With volume
forecasts potentially wry, re-examine where
outsourcing makes sense. Are outsourcers achieving
cost targets and service levels spelled out in your
contract? Now is the time to insist on results. The
depreciation of the U.S. dollar and its impact on your
outsourcing decisions can’t be overlooked.
Consider investing in IT during the
downturn. You may have intelligence
that your competitors have slashed their IT budgets.
While a natural reaction is to match these cuts, look
for opportunities to reduce costs for clients and take
some business from competitors. Spending on IT
projects at such a time is not for the faint of heart,
but the contribution margin from new clients can be
quite worthwhile.
Offer to break up organizational bottlenecks
on behalf of IT. This will help your
relationship with the CIO/CTO. Once IT projects are
completed, many of the steps required to realize the
expected benefits fall outside of IT and squarely in
the business units. Promised efficiencies need to be
realized on behalf of the corporation. Ask your CIO to
point out cases in which business unit cuts have yet
to materialize and follow up on those reports. Look
for ways to break down the internal barriers that
prohibit IT optimization and tie up expenses in
redundant silos.
Tighten IT governance. Pay
particular attention to IT capital expenditures. Keep
in mind the full cost of the average
programmer—including salary, benefits, training,
equipment depreciation, software licenses and other
costs—almost always exceeds $100,000. Programmers
deserve the same scrutiny from the CFO as if the
business were buying a $100,000 capital asset. Find
out, in detail, what discretionary activities these
programmers will be assigned for the remainder of the
budget year.
Mobilize the whole organization to squeeze
expenses out of IT and operations
with better application of IT. Not all the answers lie
in the executive suite. IT simplification and cost
reduction opportunities may be hidden in the details
of contracts, license negotiations and vendor
invoices. Smaller ideas generated from the bottom up
can complement top-down ideas the management team
intends to pursue.
— John Nerenberg , MBA, is the
president of Nerenberg.net, a technology advisory
firm based in New York. His e-mail address is john@nerenberg.net
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