Transcript Slide 1

Opportunities & Challenges in IT Cost Reduction:
Summary Report
www.infotech.com
Impact Research
1
Introduction to the Summary Report
This summary report contains sample slides from the full Impact Research Report,
“Opportunities & Challenges in IT Cost Reduction.” The actual report contains 71 slides and
provides full analysis and best practices for IT cost reduction, as illustrated in the table of
contents below.
Table of Contents for “Opportunities & Challenges in IT Cost Reduction” :
1.
Executive Summary
2.
Research Methodology
3.
Influences on Cost Reductions
4.
Cost Reduction Techniques
5.
Success of Cost Reduction Areas
6.
Staffing & Salaries
7.
Project Portfolio Management (PPM)
8.
Discretionary Spending
9.
Vendor & Outsourcer Management
10.
Vendor & Outsourcer Management Best Practices
11.
Key Conclusions
12.
Case Studies
www.infotech.com
Impact Research
2
Research Method
www.infotech.com
Impact Research
3
Research Method
Profile of Organizations Studied



“Opportunities & Challenges in IT Cost Reduction”
analyzes cost reduction practices gathered from 167
survey and 60 interview respondents.
Respondents come from a diverse mix of industries
and business sizes, and bring insights from both
North America and other regions.
Many senior leaders participated in this study, and
provide additional depth in IT and business expertise.
Respondents by Total Employees
5000+
(17%)
Respondents by Region
1 - 100
(11%)
Other
(12%)
Wholesale/
Retail
(8%)
Education
(7%)
Trans., Utilities,
Telecom.
(16%)
Government
(10%)
Financial
Services
(11%)
Business
Services
(14%)
Respondents by Job Title
Manager
(26%)
Canada
(18%)
Manufacturing
(24%)
Healthcare
(10%)
Team Lead /
Supervisor
(6%)
101 - 250
(11%)
Ow ner /
President /
CEO
(2%)
C-Level
Officer
(12%)
VP-level
(14%)
251 - 500
(16%)
1001 - 5000
(29%)
United
States
(70%)
501 - 1000
(16%)
www.infotech.com
Respondents by Industry
Impact Research
Director-level
(41%)
4
Research Method
How Survey Results Shape the Format of this Report

Respondents answered questions about a specific,
significant IT cost reduction exercise they were involved
with in the past five years, and about what activities
Respondents By Type of
contributed to this reduction. Respondents were also
Survey Answered
asked about the impact of 2008 economic conditions.
Project Portfolio
Vendor & Outsourcer
 Respondents then provided details in 1 of 4 areas:
Management
Management
21%
 Staffing and Salaries
27%
 Project Portfolio Management (PPM)
 Vendor and Outsourcer Management
 Discretionary Spending
Discretionary Spending
 This report examines why and how IT departments
24%
undertake cost reductions, then moves into results and
Staffing & Salaries
28%
best practices.
 The organizations sampled have a particular wealth of
experience in Vendor and Outsourcer Management, so
an extended set of best practices is offered for this area.
Throughout the report, a wealth of interview data validates and
illustrates survey results and provides numerous best practices.
www.infotech.com
Impact Research
5
Why are IT departments
reducing costs?
www.infotech.com
Impact Research
6
Why are IT departments reducing costs?
Overall, IT departments try to optimize cost proactively –
but the economy is a major factor, too.



An effort to optimize or decrease spending is
the largest influence on reducing costs.
Organizations are indeed focusing on self-started
cost reduction programs that contribute to IT’s
overall value.
Despite this, general economic conditions are
counted as a moderate or major influence in 6
out of 10 IT departments.
Change in IT Budget from 2007 to 2008
21%
17%
Increased more than 5%
Increased by up to 5%
16%
17%
Stayed the same
Decreased by up to 5%
Decreased by more than 5%
30%
2008 economic conditions have affected IT to
some extent, with almost 4 in 10 organizations
decreasing their spend.
“…other departments were forced to cut budgets – but we
weren’t, because we delivered a flat to modestly increased
budget for 4 years without cutting services to the organization.”
CIO, Public Service Organization
www.infotech.com
Impact Research
7
What cost reduction
techniques are used?
www.infotech.com
Impact Research
8
What cost reduction techniques are used?
Cost reduction activities vary across organizations, but a few
types of efforts are quite common.
Staffing & Salary Changes:
 Change in use of consultants/contractors
 Layoffs or retirements
 Change staff duties or training
 Freeze on raises or decrease bonuses
 Move full-time to part-time
While 3 in 10 organizations have used layoffs
to reduce costs, changing the use of
contractors & consultants is the most popular.
Reprioritizing or cancelling projects are popular
choices. Fewer IT departments introduce
initiatives that specifically drive cost savings.
Vendor & Outsourcer Management:
 Renegotiate vendor/supplier/outsourcer
contracts
 Change outsourcing mix
Discretionary Changes:
 Change travel levels/policies
 Change training levels for staff or
management
 Reduce team builders/events
 Change non-monetary benefits
Changing discretionary spending & travel
policies contributes to discretionary spending
reductions, but few organizations focus here.
www.infotech.com
Project Portfolio Management (PPM):
 Optimize business processes
 Reprioritize capital expenditures/projects
 Cancel/delay capital expenditures/projects
 Introduce new cost reduction projects
Renegotiating vendor & outsourcer contracts is
very common, with up to half of organizations
undertaking this activity.
Impact Research
9
How successful are cost
reductions in each focus area?
www.infotech.com
Impact Research
10
Executive Summary
Organizations that focus on vendor
and outsourcer management and
staffing and salaries are most
successful in saving money – but
those savings don’t happen without
hard work or growing pains.
 Project portfolio management and
discretionary spending offer fewer
savings opportunities than
organizations first realize, and
tampering with these areas could
cause significant distress in IT.
High Gain

Staffing & Salaries
Vendor & Outsourcer
Management
Low Gain
The success & ease of reducing costs varies
considerably by focus area.
Discretionary Spending
Project Portfolio
Management
High Pain
Low Pain
“IT departments are now running leaner and they can tell management, ‘Look, we’re getting closer
to the edge. It’s still okay, but if you cut further, you’re going to have major consequences’.”
IT Director, Healthcare Organization
IT organizations may not know where the cost savings opportunities are, or recognize the
accompanying pitfalls. The best practices in this report help boost savings while preventing pain.
www.infotech.com
Impact Research
11
What mitigating steps & best
practices should IT departments
use when reducing costs?
www.infotech.com
Impact Research
12
What mitigating steps & best practices should IT use when reducing costs?
Mitigating Steps & Best Practices








Staffing
Understand why tracking present & future skill-set needs aids staffing
decisions.
Learn to increase the training budget to realize productivity gains.
Project Portfolio Management
Understand why a clear project management strategy and ongoing
prioritization is essential.
Use projects with a savings component to increase IT’s value.
Discretionary Spending
To avoid severe negative impact to staff morale, choose the right
discretionary budget items to pull back on.
Understand how staff will be impacted by certain policy changes.
These mitigating steps
& best practices are a
sample of what is
available in the full
Impact Research
report, “Opportunities
& Challenges in IT
Cost Reduction.”
To download the full
report, click here.
Vendor & Outsourcer Management
Vendor & outsourcer management is time consuming, so learn how to
properly organize the continuous cycle of activities required.
Learn which vendors have the most cost savings potential.
www.infotech.com
Impact Research
13
Case Studies
Sample Case Study
Proactive Project Portfolio Management
Industry
Pharmaceuticals
Employees
2700
Type of Organization
Private
IT Employees
60
Number of Locations
More than 5, international
Revenue
$1B
Cost Reduction Period
2005-2007
Revenue Growth
-9%
IT Complexity
High
IT Budget
$20M
Technology Adoption
Average
Change in IT Budget
-5%
The Situation: IT had to cut costs while in the middle of multiple, major projects. At the time, IT was treated as a cost center.
Steps Taken: The CIO at this organization believes the value
of IT is amplified during a downturn, so the project portfolio
was adjusted to provide cost savings. A few of the
initiatives that were changed included:
 Delaying new projects that could be safely pushed back.
For example, delaying the modernization program for
infrastructure and data center upgrades.
 Reducing the scope of existing projects and cancelling
parts of the e-mail archiving project and virtualization
program.
www.infotech.com

Postponing desktop PC and server upgrades. Pushing
refresh cycles for desktops from every 3-4 years to 5-6
years and for servers from 4-5 years to 6-7 years.
The Result: IT met the mandated cuts and established a
governance process that didn’t exist before the downturn.
Once revenues picked up again, the new processes
enabled IT to immediately ramp up to speed on the delayed
projects.
Impact Research
14