Amid the economic downturn, companies are searching for every opportunity to cut costs. IT represents an important part of total spending—5 percent or more in some industries—and its direct contribution to revenues and profits is often difficult to assess. As an unsurprising result, many CEOs and CFOs are eager to squeeze their CIOs’ budgets.
But finding substantial savings isn’t easy. Many CIOs have already spent years reducing costs in operations, procurement, and outside services. Among many other things, they have consolidated data centers and help desks, virtualized servers instead of buying more expensive new ones, rationalized procurement processes, postponed upgrades, and outsourced services to less expensive offshore providers.
Nonetheless, significant additional reductions and efficiencies are possible if companies take a broader look at the way they manage the IT architecture as a whole. The key to these economies is bringing business and IT leaders together in a combined effort to rationalize not only business applications and processes but also the core IT infrastructure and operations. At one large consumer products company, for example, such a joint initiative to combine, consolidate, and rationalize disparate IT systems across business units led to a drastic reduction in the size of the IT staff (by more than 50 percent in the application-management area) and inventories of spare parts, increased leverage in negotiating discounts with suppliers, and the faster completion of new IT initiatives.
When companies look solely to the IT function to find savings, the results are often limited. A joint IT–business team can achieve much more. Bringing IT and business leaders together can also help IT create new ways to make the business grow. Greater flexibility, faster times to market, and more efficient and effective business processes will outlast the downturn. For companies that see the present troubles as a chance not only to control their costs but also to reposition themselves for faster growth once the turnaround begins, restructuring the IT architecture can be among the most valuable moves.