Be careful when cutting IT expenses you don’t cut “muscle”

The big movement in companies for well over a year now has been to cut expenses and reduce the cost of operations. The IT department has not been immune to this push from the top of companies nor should it be.

When revenues decline, stockholders still expect the companies they invest in to operate profitably and to keep the stock price up. What this means is that we have to find cost savings.

I’m a strong proponent of managing company expenses in line with revenues. I’m also a supporter of understanding the IT expense as a percent of company revenue and using it as a measurement guideline.

The problem comes into play when cost cutting initiatives cut into “muscle” as opposed to eliminating “fat”.  There are critical resource requirements to provide basic levels of technology support. In normal cases, a few areas need to have some amount of backup or depth in case a key member of the team leaves for some reason.

When you begin any cost cutting initiative, you should take a very close look at the support needs of the company and how you are organized to provide that support. Identify critical support requirements that must be in place to support core competencies of the company, i.e. the IT “muscle” that’s required.

You want to try to eliminate these key resources and expenses related to the support they provide from your list of potential cost cuts. By identifying the true “muscle” of your IT organization, you help ensure that the primary business support need will be taken care of. Be objective with this exercise and validate with senior management.

If you have “star” staff members in areas that are being looked at to be eliminated, consider shifting them to your core competency support areas, , , but when you do, you may still have to cut staff somewhere in the organization. The point is that the team you want to end up with should be the very best of the staff you have today and when you have to eliminate staff, you owe it to your team and the company to lose the weakest of the bunch.

You must stay objective when doing this – it is a tough assignment.

Always try to find business opportunities that allow you to make IT investments that will save the company much more than what will be saved by cutting IT expense. Most companies have these opportunities but if you wait until the “cost cutting” message comes down, it is too late.

One of your best assets is a track record of success and one that shows you constantly focus on things that provide business value to your company. The more you work in IT the more you will discover that the biggest cost saving opportunities are things you can do to help other departments in the company, , , not usually what you can save in IT. Don’t rule out technology cost savings, , , just be aware there may be bigger fish elsewhere in your company.

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