Cracking the Whip On IT Spending

By Allan Alter  |  Posted 09-11-2007

Cracking the Whip On IT Spending

Compared with their peers at larger companies, mid-market CIOs are under far less pressure to reduce costs; only a third say their company's top management believes there is fat in the IT budget, about half the rate at companies with revenues of more than $500 million.

Maybe that's why so many of these companies aren't taking advantage of some of the best ways to reduce IT costs. CIOs aiming to reduce costs are more likely to reduce spending on services than on any other item in the IT budget. But they might save even more by participating in group buying arrangements, consolidating servers and storage, or adopting ITIL (IT Infrastructure Library, which provides smart practices for IT managers and staff; for more, see go.cioinsight. com/ITIL), Our study reviews 20 cost management techniques, technologies and services, and finds that among mid-tier firms, only four are more likely to produce large savings. Surprisingly, such popular cost management approaches as service level agreements, benchmarking and chargebacks provide the least savings.

Finding 1: Modest Cost Pressures for SMB CIOs

Finding 2: Few Mid-Tier Firms Plan to Cut Staff Costs

Finding 3: 20 Ways to Save Money on IT

Next page: Modest Cost Pressures for SMB CIOs

Finding 1

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Finding 1
Modest Cost Pressures for SMB CIOs (Slideshow)
Mid-market IT executives live a relatively low-stress work life, at least when it comes to reducing costs. Fewer than a third say they are under more pressure to trim spending than their counterparts in other departments or work for executives who believe the IT budget is bloated. That's a far lower figure than at larger companies. An economic downturn could change everything, but for now, most mid-tier CIOs can do their jobs without worrying about spending cuts.

Next page: Few Mid-Tier Firms Plan to Cut Staff Costs

Finding 2

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Finding 2
Few Mid-Tier Firms Plan to Cut Staff Costs (Slideshow)
Services, hardware, software and projects are all more likely to be cut this year than staff and labor costs. Companies with revenues of more than $500 million are almost three times more likely to cut staff and labor costs than mid-tier firms. But that could change in a hurry if these CIOs are challenged to make sudden cuts. Another difference: About twice as many small and midsize companies have no plans to cut IT costs at all. But both mid-market and large companies would target services first and make security and disaster recovery spending the last to go.

Next page: Teamwork + Negotiation + Standards = Savings

Finding 3

: 20 Ways to Save Money on IT">

Finding 3
20 Ways to Save Money on IT (Slideshow)
We examined 20 different ways companies try to save money and asked whether they resulted in large or minimal savings. Only five of these approaches (the approaches with a Savings Ratio greater than 1) provide large savings for more than half the companies that use them. And for small and midsize businesses, virtualization (especially when combined with hardware consolidation and storage) is clearly the best way to take a bite out of your budget. But one of the least used approaches, establishing or joining an existing group buying arrangement with other companies, also should be considered; it's a way SMBs can compensate for their relatively poor negotiating status. But even without the power of a buying group behind you, it's worthwhile trying to negotiate for better deals from your vendors.