Economy puts IT into penny-pinching mode

LATEST NEWS

Computerworld is New Zealand's only specialised information systems fortnightly.
Subscribe now for $100 (23 issues) and save more than 37% off the cover price!

Get the latest news from Computerworld delivered via email.
Sign up now

Many are cutting back, but Cisco plans to up its IT spend

By Patrick Thibodeau | Framingham | Monday, 3 November, 2008

With the economy struggling and financial markets in a state of chaos, it's becoming a hard time to be an IT manager.

At Gartner's Symposium/ITxpo conference in Orlando last month, possible staffing reductions topped every how-to-survive-the-recession list that the firm's analysts presented. They said IT execs should prepare for measures such as hiring freezes, job cuts and the elimination of management layers.

And while Gartner still expects IT spending to grow by small amounts this quarter and during 2009, projects with high price tags and lengthy returns on investment may be a hard sell internally. Caution will likely be the watchword at many companies -- for IT as well as other departments.

IT managers can try to push back by demonstrating that technology investments can make a difference for their organisations from a business or financial standpoint. For instance, state and local governments hurt by tax-revenue declines may be able to offset some of the lost income by expanding online self-service capabilities on their websites.

Also, there is expected to be continued demand for storage technologies and for business intelligence tools that can help users evaluate spending plans and business risks. Ironically, demands on IT may grow because of spending cuts. For instance, if PC replacements scheduled for next year are put off because of economic concerns, helpdesk calls from users will likely increase.

New technologies that can help companies avoid hardware upgrades and other capital-equipment costs -- for example, cloud-based software-as-a-service (SaaS) offerings or server virtualization software -- also may get more attention.

The University of Cincinnati is adopting a SaaS strategy for email, according to infrastructure manager Mark Young. He says the university is close to signing an agreement with Microsoft to use the Exchange Labs hosted email service instead of its current messaging system from Mirapoint.

Switching to the Microsoft service is attractive partly because it promises to deliver immediate financial benefits, Young says. Microsoft, which offers Exchange Labs to universities as part of its free Live@edu suite of collaboration tools, will take care of storage costs and some of the other expenses of providing email to the university's users. That will let the university reduce its spending on hardware and systems administration and free up IT staffers to do more productive work.

But on other IT initiatives, Young says, the university plans to proceed cautiously and watch what other schools do to see "what saves money and what doesn't".

Blair Mandryk, global IT manager at office furniture maker Haworth, had been looking to cut his technology costs long before the recent economic events began unfolding. For instance, his staff previously reduced 450 physical servers down to 100 boxes through the use of VMware's virtualisation software.

But nowadays, Mandryk says, IT managers also have to find ways to expand services to end- users without necessarily being able to increase their tech budgets. "The business is still expecting IT to deliver, so without having the money to do it, you have to find creative ways," he says.

Mandryk predicts that SaaS "is going to be a huge trend", partly as a result of the economic downturn. A year ago, he wouldn't have considered SaaS technologies himself. Six months ago, "probably yes," he said -- and now, "absolutely".

Since many companies are likely to put off IT upgrades until the economy improves, another strategy for coping with the downturn is to get the most out of what you already own.

Chris Mincay, an IT procurement manager at a grocery chain that he asked not be identified, says he's looking at ways to make better use of the applications that he himself relies on as part of his job. "Sometimes applications are so sophisticated that you only use a certain percentage of [their capabilities]," he says.

Scotty Bryan, CIO of the Kentucky Higher Education Assistance Authority, is trying to trim IT costs wherever he can -- a process that began earlier this year when credit tightening put a big crimp in the student loan business.

According to Bryan, the authority's IT department has been managing disks better to increase the available storage capacity, getting rid of software modules that aren't being used and shifting users to electronic documents to cut down on paper consumption. Job vacancies in IT aren't being filled, and purchases are being reviewed much more closely than before, he said.

At the Service Employees International Union, CIO Charles Everett says he expects to be asked to help find ways to cut overall operating costs. SaaS is an option, he says, although he isn't sure it would cost less in the long term compared with continuing to run software in-house.

"I think [SaaS] is always going to be more pricey than doing it ourselves, but we will see," says Everett, who is also looking at increased IT automation as a potential cost-saving option.

Not everyone is cutting back. Cisco Systems CEO John Chambers said during a Q&A keynote session at the Gartner conference that he plans to increase Cisco's IT spend by 10% next year, regardless of what happens to the economy. Economic slowdowns can be used to "gain huge competitive advantage" by companies that see IT as "the enabler of business strategy", Chambers said.

After the keynote session and in interviews conducted with IT managers near TV monitors that showed a CNN report on yet another Wall Street sell-off, it was impossible to find anyone as enthusiastic as Chambers about the potential for moving ahead so aggressively on IT investments.

But harsh economic conditions may make possible some IT actions that were off the table in more flush times. For instance, John McLatchey, an enterprise architecture planner at a healthcare company that he asked not be identified, said the thinking in his group is to try to push through changes that may have been politically difficult before, such as getting rid of legacy systems that are expensive to maintain. "Let's use this as an opportunity," he said, describing the internal view.

Miguel Gascon, CIO at Panama-based Global Bank, is taking a much more basic step -- one that goes to the heart of the new financial cautiousness. Gascon said he plans to make invoice verification a higher priority in his department, in order to make sure that IT vendors' bills are correct and meet the terms of their contracts.