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15 August 2006

Do you really want to save money?

By Andrew Clifford

We find it hard to save money in IT because big cost savings threaten our jobs. But if we want long-term job security we must reduce costs, even if it means we lose out in the short term.

Of course we all want to reduce costs. We want to bring our project in under budget. We want to get a good deal on our hardware. We want to negotiate the best price with our outsourcers.

But these are relatively small savings. Costs in IT come from two sources: from running existing systems; and from running projects. Most projects fail to live up to our expectations. We have lots of difficult legacy systems. We have many systems doing the same thing, because we find it hard to get rid of the old ones. We spend a lot of money fixing old and incompatible technology.

The really big savings in IT come when we can tackle this waste. When we identify which parts of which projects are not going to deliver, and avoid doing them. When we manage existing systems better so that there are no difficult legacy systems, and no overlap. When all our systems follow the same technical standards.

But then there is a problem. Some projects would be cancelled. Other projects would be reduced in scope. We could slim down our computer operations. We would not need as many support staff. We would need fewer IT managers, project managers, IT architects, and technical specialists.

To ask the question a different way, would you like your IT budget cut in half (or that of your customers)? Would you like half your colleagues made redundant? Would you like your project cancelled? Would the IT department have as much influence if it was not so expensive?

Put like this, few of us really want to save money. We want to save a little here and there so that we look good. But we do not think about big cost savings because we would be the casualties.

I believe that these significant cost savings are possible. We should face up to the challenges for two reasons.

Firstly, efficiency wins over inefficiency. If your business does not make these cost savings, your competitors will. This applies whether you are an end-user organisation, or an IT supplier. You have to choose between risking your job in the short term, or definitely losing it in the long term.

Secondly, there is a lot of IT work to be done. If we make IT simple and cheap, the business case improves. We could apply IT to many more business problems, and bring much more value. Cost savings will be more than compensated by additional opportunities.

We can learn a lot from retailing. Over the last 20 years, nearly everything has become cheaper. Shops that have kept prices high, pompously declaring that their customers are not driven by price, have lost out. They have been overtaken by their cheaper competitors. But people are spending more than they ever used to, and the cheapest shops make the most profit.

The message is clear. We should not fear cost reduction. We should grasp it passionately. Next week I will set out how.

Next: Six ways to cut costs


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