IT executives have a number of major initiatives available to them for cutting capital expenses and operational costs in 2008 that can trim the overall IT budget by five percent or more. The largest opportunities lie in process and management changes. There are also gains to be made from workforce alignments, including outsourcing, as well as capitalizing on technology shifts.
Workforce Alignment – 25%
Contrary to reports that job opportunities in the IT field are shrinking, the battle for IT talent is getting more intense, as the number of shortages in key areas are increasing. This is putting pressure on IT executives to create and execute a workforce diversity plan that includes hiring new talent, retention and retraining strategies, succession strategies, contingent workforce allocations, and outsourcing.
The new paradigm calls for executives to hire self-starters that are adaptive, creative, flexibility, independent, and knowledgeable in ecosystem logic rather than inflexible, in-depth technical personnel.
IT executives should be attempting to drive annualized staff productive utilization up towards 70-to-80 percent. This can only be achieved by cross-training staff to handle tasks not normally within one’s domain, using consultants, and/or outsourcing. Executives need to determine what tasks should remain in-house and which ones should be given to outside firms.
Companies must maintain control of their architecture while the construction and operations tasks may be done by outside skills, depending on the criticality of the efforts and the extent to which it is customer facing. The other core skills to be acquired, developed and maintained in-house are the user and vendor relationship management and project management skills.
IT organizations that can manage their user and vendor relationships, operations and projects, as well as strategize and architect for the future are well positioned. Add to that a good succession plan and executives will have a sustainable operation that can meet or exceed expectations.
If executives focus on restructuring the workforce to achieve the flexibility that may be required in the future, it is possible for IT to reduce its workforce expenses by up to 25%. Executives that have executed these types of plans have reduced their operations staff by up to 50% and their help desk staff by up to 30%.
Gains Through Process Improvements
Process improvements can offer the biggest gains for the IT organization. Gains can be made by addressing non-value-added projects, poor SOX (Sarbanes-Oxley Act) compliance processes, IT financial management, or non-optimized procurement processes. IT executives should undertake a study of these items and fold the quick hits into their 2008 budget planning process.
The people conflicts, culture, and personnel integration issues can be tough nuts to crack, but there are a number of areas where process improvements could occur which can reduce operational expenses. The top area for IT executives of public companies to scrutinize for savings is the SOX compliance processes.
SOX Changes – 20%
The newly approved Sarbanes-Oxley Accounting Standards No. 5 (AS5) guidelines greatly reduce the cost of compliance. One of the biggest savings from this from an IT perspective is the ability to combine all of the regulatory tests into a common test plan that can be executed periodically. The outputs and reports can be certified or validated for use by the auditors, lines of business, various regulatory agencies, or others that seek confirmation of compliance. The savings can reduce the cost of compliance by more than 20%.