Cutting back on technology spending makes sense in this economy. But if you make smart choices about how you trim your tech budget, you can conserve cash without compromising your business capabilities and, sometimes, even make them stronger.
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Gartner predicts that about half of midsize companies will freeze or cut their technology budgets this year. Fortunately, there are ways to cut costs on nonstrategic activities and pare down infrastructure without compromising your core business:
- "Virtualize like a madman," says Riki Williscroft, a former IT manager for several midsize companies in Auckland, New Zealand. Implementing virtual servers, networks, storage, disaster recovery, and even security can help you cut hardware and cooling costs, increase flexibility, decrease hardware maintenance, and speed installations, says Gartner VP Jim Browning. And users won't even notice the difference.
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- Standardize on just a few laptop and PC configurations. The more complex the environment, the harder it is to keep up with security updates and bug fixes, and the more it costs to maintain systems. You can also reduce the number of third-party maintenance contracts and sometimes shrink the costs of those contracts by simplifying operations. It's worth standardizing on new gear only if by doing so you can eliminate at least one full-time IT position, thereby earning ROI on the cost of new hardware, Williscroft says. It may be tough for small companies to determine that ROI, because they often don't track the amount of time IT spends repairing equipment.
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- Deploy asset management software. Andy Woyzbun, an analyst at research firm Info-Tech Research Group, says many midsize companies, especially those with multiple locations, have little idea how much hardware they have or even where it is. Catalog your hardware, standardize it, and get better use out of it. Woyzbun notes that health care facilities often have expensive but underutilized equipment in outlying facilities. Put it on rollers and use it where it's needed, he says.
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- Try SaaS or cloud computing when you add new applications. These remotely managed, pay-as-you-go services offer tremendous advantages for the manager holding the line on new contracts and hardware. Many companies are adopting SaaS and cloud computing for end-user applications -- think Google Apps or Zoho especially -- with good results. For instance, 850-employee Serena Software is switching its employees from Microsoft Exchange to Gmail and saving $750,000 in the process (by avoiding $1 million in Microsoft Office licenses), says René Bonvanie, senior VP of marketing and IT. Gartner's Jim Browning says IT managers in midsized companies are turning to SaaS for security applications. And Yankee Group's Steve Hilton recommends cloud-based storage and disaster recovery. "Cloud-based storage is über-cheap these days. Amazon's S3 starts at 15 cents per gigabyte per month of storage," he says.
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- Cut contractors judiciously. Looking for budget fat, some managers instantly cut all contractors. But that's a bad idea, warns InfoTech's Woyzbun. Assess the value of the applications that your contractors support and cut only those who are supporting nonstrategic apps. For example, "if the Web is critical to how you get clients and make sales, and if that service is supported through a contractor and you decided you want to protect your in-house staff, so you let the contractors go, you may find yourself in the position of having cut your arm off," Woyzbun says. "People make cost-reduction decisions badly."
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- Delay projects that will take more than a year to generate a payback. Company executives are planning quarterly these days as they wait to see what the economy is doing, says Gartner's Browning. Spend your time working on projects that either generate revenue or cut costs quickly. But don't kill good long-term projects -- just keep them on the back burner so they can be revived quickly as the economy recovers.
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Cutting and shifting costs in strategic ways can make an immediate impact on your business IT budget. In some cases, these choices make sense for the duration of the recession, but others can be more lasting and represent a true shift in how your business utilizes technology.
Elaine Appleton Grant is a reporter at New Hampshire Public Radio and a longtime business journalist.
