Thursday, 9 April 2009

Crisis, what crisis?

I'm seeing a lot of companies cutting their IT budgets, in an attempt to reduce costs. I do wonder if that's always the best strategy. Yes, IT budget is usually large, and therefore suspect. However, it is usually a fraction of the total costs of an organization. Just getting rid of external consultants (which is sometimes a good idea, anyway) will save you money in the short run, but what does cutting your IT budget mean for the long term? I think that in the long run, it will cost the organization more.

I read an article in my newspaper (NRC Handelsblad) last Saturday about how companies perform, depending on their investment strategy in times of crisis. Recent research shows that organizations that focus on cutting costs and reducing investments will have a harder time to get out of the crisis. Organizations that keep up investments (though at a lower level, more focused) are able to take advantage of the dwindling crisis (we're not there yet, though) a lot sooner.

As with all business decisions it's imperative to keep the longer term in view. Yes, you will have to look closely at all expenses you have as a company. But, sometimes you can do more with less! Possible ways to cost management can be process optimization, integration and consolidation.

The smart thing to do - again, just my humble opinion - is to keep investments at a certain level, but focus on investing in areas that will give you value for your money. For instance: optimizing your process to deliver more value for your customer (keep your customer happy, even in bad times), decrease the number of unwarranted faults, reduce the human tasks (less people), increase intimacy with your chainpartners, etc. The basic premise for these investments are: the return on investment must be visible within 6-9 months.

If at the same time your focus is on creating a more agile (system and application) infrastructure you are a lot more flexible whenever the marketplace allows new initiatives.

Just cutting the IT budget only means that you will not be able to deliver new functionality as the major part of your budget goes to maintaining the installed base. It will not gain you anything other than (short term) continuity.

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