In today’s economic climate, IT budgets are headed for stormy waters, but demand for IT services continues to rise. So how do you meet your company’s mandate to do the same or more, while reducing costs at the same time?

EquaTerra, a sourcing consultancy, identifies eight key ways that help IT to weather the storm.

1. Identify what’s discretionary and what isn’t.
Challenge: If you have 200 people working on applications—including 50 on maintenance, 50 on regulatory changes and 100 on new projects—and you’re told to cut costs by 20 percent, how do you do it? When you’re under cost pressure, it comes down to determining what’s discretionary and what isn’t, keeping in mind that the discretionary, “nice-to-have” activities will suffer the biggest blow.

Solution: Work with your internal customers to determine what delivers real business value now versus possible value in the future, and then prioritize accordingly. You may be able to cut projects by 20 percent by trimming the discretionary work. If not, you’ll need to find a way to deliver the same work for a lower price. One option is outsourcing or offshoring. If you already have an outsourcing agreement, consider expanding the relationship to include more services. 

2. Reevaluate outsourcing contracts.
Challenge: In an economic downturn, IT departments are usually expected to renegotiate outsourcing contracts to reduce costs or consolidate activities.

Solution: Remember that nothing is off the table. In previous economic crises, service providers have been willing to renegotiate contracts for the short term to ensure healthy relations for the long term. For example, after the dot-com bubble burst, one network equipment manufacturer worked with its IT service provider to reset the contract pricing and terms based on current conditions. And during economic downturns in general, one car manufacturer routinely tells all suppliers that everyone needs to take a haircut. In short, when your company is earning less, you need to spend less on services, and most providers respect that.