Economy puts IT into penny-pinching mode

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

Possible staffing reductions topped every how-to-survive-the-recession list that Gartner analysts presented at the consulting firm's Symposium/ITxpo conference in the US this month. 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 organizations 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 Web sites.

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, help desk 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 e-mail, according to Mark Young, the school's infrastructure manager. Young said the university is close to signing an agreement with Microsoft to use the vendor's Exchange Labs hosted e-mail service instead of its current messaging system from Mirapoint Software.

Switching to the Microsoft service is attractive partly because it promises to deliver immediate financial benefits, Young said. Microsoft, which offers Exchange Labs to colleges 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 e-mail to the university's users. That will let the school reduce its spending on hardware and systems administration and free up IT staffers to do more productive work.

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But on other IT initiatives, Young said, 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 Haworth, an office furniture maker, 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 Inc.'s virtualization software.

But nowadays, Mandryk said, 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 said.

Mandryk predicted 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."

Use What You Have

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, said 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 said.

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 said he expects to be asked to help find ways to cut overall operating costs. SaaS is an option, he said, although he isn't sure it would cost less in the long term compared with continuing to run software in-house.

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

Not everyone is cutting back. John Chambers, CEO of Cisco Systems, said during a Q&A keynote session at the Gartner conference that he plans to increase the networking vendor's IT spending by 10 percent 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 health care 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 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.