Cost reduction is on everybody's mind, so reducing the cost of IT may be high on your list. That may not be the right thing to do (more below), but if it is, there may be many ways to do it:

• Outsource commodity services and spend your money on strategic IT services. Data center management, helpdesk services, network management, email, and website hosting are commodities. Why are you spending money on staff on those services? Your IT payroll should be focused on strategic matters that enable streamlined (lower cost) business processes, build revenue (or prevent revenue erosion), or reduce the cost of your applications.
   
• Move to Software as a Service (SaaS). It has its drawbacks, but for small to midsize businesses (SMBs), this may bring cost savings. Extensive tailoring may make this a bad choice, but realistically speaking, this could be a quick method for gaining 80% of the capability you need at 20% of the cost.
   
• Fix broken project management. If you have projects that go on for ever, don't deliver, and make your vendors rich, you need to rethink your project management standards and practices. If you're large enough, you should set up a project management office (PMO) that has project process standards, offers mentoring within the company, knows how to measure progress and business satisfaction, and understands vendor management. If you're an SMB, you would benefit from a small cadre of trained project managers, a library of standard processes, a good project planning tool, and some outside mentoring.
   
• Improve your strategic planning and governance. You'd be surprised how this can save money. How much have you spent on projects that didn't help your business? How many business needs have gone unmet for lack of IT support? Strategic IT planning will help focus the IT department on services and capabilities that improve productivity and enable better business processes. Good governance will align IT spending with business priorities and make IT spending choices transparent. Shift IT budgeting to the business - you'll get better results with less resentment.

Your circumstances may determine the best choice or combination of approaches. Ask us about other possibilities.

Before you decide to cut, think about the larger question: Is reducing your IT budget the right thing to do? Many companies spend 4%-5% of gross revenue on IT; those that spend less may be starved for technology support. (The average for your industry may be different.) What circumstances weigh against a cut?

• Some companies are reducing staff and taking up the slack with improved IT. We're not fond of layoffs, but if it's necessary, how exactly is the work going to get done?
   
• Some companies are preparing to increase market share when their competition fails to survive the downturn. Preparation starts now.

In these tight times, cost reduction can be important. The real objective is to get through the hard times and position your company for the rebound. Allow us to help you reduce IT costs with minimum damage to your business, or better yet, plan your IT expenses for the next rebound.

"We were able to stay focused on our core business objectives because Avatar provided hands-on program management expertise ranging from our needs assessment, proposed solutions, budget approval, vendor selection and management through the implementation of our integrated accounting and CRM solution."

Martin Vaughan
Vice President,
New Business Development,
Management Ventures, Inc (MVI)