Opportunities & Challenges in IT Cost Reduction: Summary Report

1. Opportunities & Challenges in IT Cost Reduction: Summary Report

2. Introduction to the Summary Report

3. Research Method

4. 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

5. Research Method How Survey Results Shape the Format of this Report • 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.

6. Why are IT departmentsreducing costs?

7. “…other departments were forced to cut budgets – but we weren’t, because we delivered a flat to modestly increased budget for 4 years without cutting services to the organization.” CIO, Public Service Organization Why are IT departments reducing costs? Overall, IT departments try to optimize cost proactively – but the economy is a major factor, too. • 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 IT’s 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

8. What cost reductiontechniques are used?

9. 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 Reprioritizing or cancelling projects are popular choices. Fewer IT departments introduce initiatives that specifically drive cost savings. While 3 in 10 organizations have used layoffs to reduce costs, changing the use of contractors & consultants is the most popular. • 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.

10. How successful are cost reductions in each focus area?

11. The success & ease of reducing costs varies considerably by focus area. Organizations that focus on vendor and outsourcer management and staffing and salaries are most successful in saving money – but those savings don’t 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 departments are now running leaner and they can tell management, ‘Look, we’re getting closer to the edge. It’s still okay, but if you cut further, you’re going to have major consequences’.” IT Director, Healthcare Organization Staffing & Salaries Vendor & Outsourcer Management High Gain Project Portfolio Management Discretionary Spending Low Gain High Pain Low Pain Executive Summary 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.

12. What mitigating steps & best practices should IT departments use when reducing costs?

13. What mitigating steps & best practices should IT use when reducing costs? Mitigating Steps & Best Practices 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.

14. Proactive Project Portfolio Management Sample Case Study Case Studies