October 14, 2008, 9:09 PM — Every time the economy turns downward, IT shops take a hit.
In the U.S. IT market, Forrester Research predicts that growth in technology goods and services will slow in the fourth quarter of this year, a scenario likely to continue into the first half of 2009. Gartner, meanwhile, is advising clients to hedge, rather than presuming the economy will pick up next year.
The best time to consider cost-saving measures is before the CFO comes knocking on your door to ask -- or demand -- that IT slash its budget.
(Read the InfoWorld features "Is IT recession-proof?" and "Guerilla IT: How to stop worrying and learn to love your superusers.")
"Are we trying to cut IT costs? Yes," says Jon Crowe, director of enterprise technology services at Cabela's, an outdoor equipment retailer. "We're sitting down and thinking how we can be smart about it."
Indeed, several IT execs InfoWorld interviewed for this story are looking to ferret out simple, and often surprising, ways to save money during tight times.
1. Harness consumer technologies
Plenty of IT shops are wrestling with how -- or whether -- to fit consumer and Web 2.0 technologies into the enterprise, says Peter Blatman, a principal in Deloitte Consulting. But some are already making it work to their advantage.
Vivek Kundra, the CTO of the District of Columbia, recalls the day he had an epiphany: The technology most users employ at work is kludgy compared to what they use in their daily routines, even though consumer technologies are often less expensive or even free. "It comes down to a philosophical view I have that, for some weird reason I cannot understand, the way we organize ourselves at work is so much less agile than what we do in our personal lives," Kundra explains. "Why not use consumer technology at work?"
That's exactly what Kundra did. "We were spending a ton of money on our portal, and I realized we didn't need to," he adds. So Kundra abandoned the portal and replaced it with considerably less expensive wikis and turned to YouTube videos. Kundra said the moves were relatively easy because IT did not have to train employees how to use the tools.
Echoing those sentiments is Greg Rhoades, senior IT manager of infrastructure services at Panera Bread. Rhoades says his company is also moving toward consumer technologies. "We're taking some steps in that direction. We're also looking at social networking tools because people use them in their personal lives, and we want to leverage the technologies that people already know how to use."
The cost avoidance of not having to train people on new technologies is just one of the areas in which companies can save. "Although the ROI of using consumer technologies is not always clear on an individual basis, when taken as an aggregate, the savings can add up," says Sean Rhody, a principal in Capgemini's technology transformation practice.
2. Get the business side to scope projects
IT shops all too often shoulder much of the responsibility for investigating technology projects, and even though the proposals come from the business, the cost of scoping projects, conducting research, reviewing architectures, evaluating the requisite technologies, and other information gathering inevitably fall on the IT shop, constituting a significant burden that can eat up weeks of work for each potential initiative, Rhody says.
"When the cost for evaluating a proposal falls on IT, the business side tends to swamp the demand function with excessive requests," Rhody adds. He cites as an example one IT shop that averaged a four- to six-week turnaround for such activities and, ultimately, had to limit how many proposals it would accept -- which led to dissatisfaction with the IT department.
"Pass that back to the lines of business," Rhody advises. "There's immediate savings. When the cost of proposals is born by the business side of the house, frivolous proposals are stopped, proposals are better prioritized, and what is proposed is more likely to have a true ROI to the business, reducing waste and abandoned projects."
Bob Lewis, president of IT Catalysts and an InfoWorld contributing editor, takes it one step further in suggesting that enterprises should "give the rest of the business a direct stake in the health of the IT organization and the company's technical architecture." It's not easy, Lewis explains, but IT treating the rest of the business as a customer and charging back for its services doesn't really work, either, he contends in a Keep the Joint Running post.
3. Use open source networking
Open source is a well-known approach for reducing software spend, but if there's one largely enterprise infrastructure area that's ripe for reaping cost-savings by tapping open source, it's the network itself.
Contributing Editor Paul Venezia first put forth that possibility this spring in the article "Open source on the wire: It's already on your servers, why not running your network?" He points out that modern operating systems offer routing and firewalls, not only performing better than their dedicated cousins but, particularly when using open source software, doing so at considerably less expense. Linux, indeed, boasts fast, kernel-level packet forwarding, routing, firewall, and NAT capabilities.
"You're not going to replace switches, but you can replace VPN concentrators and routers with white boxes using true OSS [open source software] and commercialized OSS solutions," Venezia explains, adding that IT shops can find significant savings buying hardware on eBay -- if they're armed with the know-how to support the devices themselves.
An ancillary approach Venezia suggests for those companies that have a couple dozen Cisco switches and corresponding SmartNet support is to buy an extra switch, set it on a shelf, then cancel those support subscriptions. "If one fails, replace it with the spare, and buy another spare," Venezia continues. "Instead of buying new firewalls, check out the plethora of extremely solid OSS firewalls. There might be a little bit of a learning curve, but a little elbow grease goes a long way."
4. Hold off on Windows Vista
Economic downturn or not, many enterprise IT shops are already delaying Windows Vista adoption -- and an uncertain future makes pushing back the new OS all the more alluring.
According to a July report from Forrester Research, fewer than 1 in 11 PCs within large enterprise are actually running Windows Vista, so it follows that of the 50,000 enterprise customers surveyed, 87.1 percent were still running XP as of June's end.
Countless well-documented reasons to stick with Windows XP exist. Chief among those: Vista's lack of compelling value and poor performance, coupled with the resurgence of Windows XP, thanks to years of updates and patches that make XP more stable and secure than Vista. Plus, most enterprises need to replace their PCs to be able to run Vista, making the upgrade cost very high.
"We're holding off on Vista, but it's not just because of the economy," Cabela's Crowe explains. Other companies, however, are finding the current economic turmoil reason enough to delay a new operating system deployment. "In tight times, I can see making an argument to not migrate to Windows Vista and, instead, saving the short-term investment." Capgemini's Rhody said.
Acknowledging the throngs of customers that still prefer Windows XP, Microsoft last week extended the XP "downgrade" option for another six months. Of course, IT will still have to pony up for a copy of Vista that is then replaced with XP, but the good news is that users can obtain Windows XP that way until July 31, 2009. This marks Microsoft's third extension of XP's availability.
"Putting off the next version is fine, so long as you don't wind up spending IT resources and money customizing it just to keep it up and running," Delotte's Blatman says.
5. Bring in the CFO
Asking the chief of finance to help prioritize can offer a window into the business priorities, so IT can better understand the larger view of projects and adjust its own efforts accordingly. "The CFO can say, 'It makes sense to cut over there,' because another department is undergoing an initiative that aligns with that," says Amy Wohl, president of Wohl Associates.
What's more, when the CFO goes around to a company's business units looking for places to cut, an opportunity arises to prove what IT executives already know: IT is uniquely positioned because an incremental investment can result in more than commensurate return, according to Deloitte's Blatman.
A decision Panera made recently exemplifies how investing smartly can actually be the more frugal avenue. "We decided we could either build analytics into our portal or look at the available tools," Rhoades says. "We saved money directly by buying the analytics." Otherwise, it would have cost more and taken longer to create that functionality in-house, and the goal was to improve communications with store managers as soon as possible, so they could spend less time on their PC and more in the front of the house.
Different enterprises have varying reasons to include the CFO in cost-savings plans, but they all share one bond. "IT possesses the kind of leverage you can't find anywhere else in the organization," Blatman says. "Things will rebound eventually and get back on track. IT doesn't want to be behind then, so folks still need to be planning long-term."