Opportunities

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Opportunities Challenges in IT Cost Reduction
Summary Report
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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 Executive Summary Research Methodology Influences on Cost Reductions Cost Reduction Techniques Success of Cost Reduction Areas Staffing Salaries Project Portfolio Management (PPM) Discretionary Spending Vendor Outsourcer Management Vendor Outsourcer Management Best Practices Key Conclusions Case Studies
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Research Method
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Research Method
Profile of Organizations Studied
Respondents by Industry

• 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 Region
Respondents by Job Title
Respondents by Total Employees
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How Survey Results Shape the Format of this Report
Research Method

• Respondents answered questions about a specific,
  significant IT cost reduction exercise they were
  involved with in the past five years, and about
  what activities contributed to this reduction.
  Respondents were also asked about the impact of
  2008 economic conditions.
• Respondents then provided details in 1 of 4
  areas
• Staffing and Salaries
• Project Portfolio Management (PPM)
• Vendor and Outsourcer Management
• Discretionary Spending
• This report examines why and how IT departments
  undertake cost reductions, then moves into
  results and 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.

Respondents By Type of Survey Answered
Throughout the report, a wealth of interview data
validates and illustrates survey results and
provides numerous best practices.
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Why are IT departmentsreducing costs?
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Overall, IT departments try to optimize cost
proactively but the economy is a major factor,
too.
Why are IT departments reducing costs?

• 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 ITs
  overall value.
• Despite this, general economic conditions are
  counted as a moderate or major influence in 6 out
  of 10 IT departments.
• 2008 economic conditions have affected IT to some
  extent, with almost 4 in 10 organizations
  decreasing their spend.

Change in IT Budget from 2007 to 2008
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What cost reductiontechniques are used?
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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

• Project Portfolio Management (PPM)
• Optimize business processes
• Reprioritize capital expenditures/projects
• Cancel/delay capital expenditures/projects
• Introduce new cost reduction projects

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.
Renegotiating vendor outsourcer contracts is
very common, with up to half of organizations
undertaking this activity.
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How successful are cost reductions in each focus
area?
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The success ease of reducing costs varies
considerably by focus area.
Executive Summary

• Organizations that focus on vendor and outsourcer
  management and staffing and salaries are most
  successful in saving money but those savings
  dont 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.

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.
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What mitigating steps best practices should IT
departments use when reducing costs?
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Mitigating Steps Best Practices
What mitigating steps best practices should IT
use when reducing costs?
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 ITs 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.
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.
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.
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Case Studies
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. 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. 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. 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. 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. 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 didnt exist before the downturn. Once revenues picked up again, the new processes enabled IT to immediately ramp up to speed on the delayed projects. 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 didnt exist before the downturn. Once revenues picked up again, the new processes enabled IT to immediately ramp up to speed on the delayed projects.