Optimising Operational IT – survey findings

These are lean times. And the belt-tightening in IT is going to be widespread, deep and prolonged. Just over 50% of the 555 IT decision-makers who responded to the latest Information Age survey into IT strategy and spending plans reported that they were ‘currently targeted with reducing IT operational expenditure (opex)’.

A further 25% revealed that they were likely to come under pressure to do so in the next six to 12 months. That leaves just under one in four IT decision-makers who are not being called upon by the business to cut their day-to-day running costs.

The real surprise is the depth of those cuts. When asked how much they were being asked to eliminate, the most common response (from 44% of those tasked with cutting IT opex) was between 6% and 10%. A smaller group – 23% of cost-cutters – were expected to take out 0% to 5%. But 13% have the daunting task of having to slice more than 20% out of their operational IT expenditure.

That picture of cutbacks is outside the experience of most IT leaders. In fact, its depth is unprecedented in five decades of IT.

As for the timescale for the cuts, they are being executed at a previously unseen pace. Just over half those with shrinking IT budgets expect to attain those new levels within six to 12 months.

Means to an end

How do they plan to make those cuts: deferring non-critical IT investments, reducing staff, beating up suppliers on price and applying IT in select areas of the business where its ability to cut costs is proven?

The most common approach to reducing opex among the cost-cutting group was postponing non-vital purchases: 40% said they were holding back on previously scheduled PC and printer upgrades, new applications purchases and the like.

Also high on their lists were reducing IT staffing costs and reworking supplier relationships: 37% of respondents said they would cut headcount while 28% said they intended to reduce their supplier numbers and take advantage of the buyer’s market to renegotiate contracts with existing suppliers.

Other initiatives were targeted on technology. Just under a third (30%) said they expected to cut costs further through server virtualisation. Indeed, among all respondents, raising efficiency was the top-ranked priority for the coming year, with 65% identifying that overall goal. Cost cutting was picked by 54% of respondents, with delivering new functionality and increasing customer satisfaction in the top-three priority list of 39% and 36% of respondents respectively.

When asked to name the single IT initiative or project that would have the most positive impact on their organisation’s effectiveness during the coming year, far and away the most common response was ‘virtualisation’. Outsourcing, of various kinds, and software-as-a-service were two other common answers to the free-form question.

However, when respondents were asked which of the following four approaches – managed hosting or co-location; outsourcing applications; outsourcing network management; software-as-a-service – they had adopted or considered, the latter ranked last in adoption to date (13% of respondents), even though it had been considered by most respondents (39%). Managed hosting and co-location was the most commonly adopted approach to date (34%).

Respondents were also asked whether longer-term strategic IT projects were being de-prioritised in favour of shorter-term, tactical projects. Perhaps surprisingly given the budget pressures, for the largest segment of respondents (47%) the number of strategic projects has not been affected. And 35% said they had reduced in number slightly. That supports the notion that many IT organisations believe they can effect much of the necessary cuts by taking costs out of operational IT.

Perhaps the biggest question of all, though, was whether the economic crisis would affect the role of IT in the business. Half of respondents said they believed IT’s role would remain unchanged, whereas 42% agreed that ‘IT will play a vital role in helping the organisation navigate through the recession’. Happily, only 8% agreed with the statement ‘IT will lose some of its importance as budget and projects are cut/de-emphasised’.

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media plc from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The Economist Intelligence...

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