Manage Learn to apply best practices and optimize your operations.

Five ways to trim your IT budget -- and save your career

Budget-trimming can be tough, but there's a responsible way to do it. Here are a few tips to get you thinking.

It's time.

Don't wait for the say-so from management. Even the rosiest views of the U.S. economy are calling for slow growth through much of this year. That will trickle through businesses and some CIOs are going to have to cut their IT budgets.

So it is best to do it now. There will be no magic bullet, but some creative work can trim the edges here and there. Here are five tips from analysts and midmarket CIOs that could help ease the bleeding.

1. No, really. Don't wait.

There is a tendency to connect the country's last economic recession -- in 2001 -- with the Sept. 11 terrorist attack.

But negative growth actually kicked in around March of that year and the economy was on its way back up in November, right around the time the recession was actually declared.

The point, wrote Gartner Inc. analyst Ken McGee in a report this month, is that waiting with crossed fingers for the economy to improve and hoping businesses won't need to curb spending is a fool's game. A recession may already be under way.

The last recession prior to 2001 began in July 1990. In that instance, growth trended downward until March 1991. The start of the recession was declared a month later, in April. McGee used recession data from the National Bureau of Economic Research in his report.

At the very least, McGee wrote, CIOs should assemble their best employees into a cost-cutting team and put them to work looking for shortcuts that can deflate the company's IT budget. Consider asking an internal accountant to help with the numbers with which IT staff might not be comfortable. And ask a company lawyer to act as a liaison to help cut back on contracts if necessary.

2. Eat ramen noodles.

Well, not really, unless that's your thing. But if you think back to those poor college days, when you knew the value in used products and cheap food, you're probably in the right frame of mind to save a few dollars at work.

Charles Kramer Jr., senior vice president and chief technology officer at Social & Scientific Systems Inc., saved money (by being creative) without negatively affecting business productivity at the 350-employee Silver Spring, Md.-based public health research firm.

Kramer suggests some basics like revisiting telecommunication contracts ("we have a 100% success rate doing this") and considering outsourcing Web design, training and even services like email.

But Kramer has also used a scavenger's eye, looking for hidden dollars around the office. He has had success recycling old equipment to eBay or other dealers, something that requires less effort than it used to, he said. It works particularly well with old company mobile phones, he said.

"Add to that the fact that many jurisdictions now charge you to dispose of tech assets, it can not only bring in a little revenue, but help to avoid costs," Kramer said.

Kramer also found that one group in his company does a "tremendous amount of printing." He didn't ask the group to stop.

But "by knocking down the resolution with their print drivers and the defaults in the printers, we noticed a drop in toner costs although page counts stayed level," Kramer said.

3. If you're a large midmarket company, take a look at what larger, global companies are doing.

Phil Fersht, research director at Boston-based AMR Research Inc., works primarily with enterprise and larger midmarket companies, those that hover around the $1 billion revenue mark.

But the cost-saving methods on hand in those large, global companies could be aped, to some extent, by midmarket IT departments.

Fersht said many companies are having success splitting the IT budget among other departments. A move like that likely isn't the call of a CIO, but it could be instructive to mull over.

"Suddenly you're making the business units justify their own purchasing decision," Fersht said.

"You want to have your business functions optimizing technologies," he added. "It's getting that balance right. IT's setting budgets with each department. Getting them to understand what they're allowed and what they need with the technologies available."

Larger midmarket companies may also have better, cheaper outsourcing options coming their way, Fersht said. The enterprise market is already saturated for outsourced services like application management. Outsourcing companies like UST Global, Tata Consultancy Services Ltd. and Webpro International Inc., which previously looked for the high-yield deals provided by enterprise clients, may turn their sights to larger midmarket companies.

"I think they'll be forced into that market and they'll force some competition," Fersht said.

4. Look ahead and be tough on yourself.

It may seem like a no-brainer, but stepping back for the big picture and strictly enforcing an only-what-you-need culture can help stack up the savings.

Suddenly you're making the business units justify their own purchasing decision.

Phil Fersht, research director, AMR Research Inc.

George Bock, CIO at Sole Technology Inc. in Lake Forest, Calif., said he knew any reduction in consumer spending in the U.S. would affect the 500-employee action sports clothing and footwear company.

So starting last summer, Bock began looking at bulk purchases for supplies he normally wouldn't buy en masse. That meant starting early on a new round of laptops to replace outdated ones and investing in the company's first blade servers.

When 2008 rolled around, Bock and his staff closed the pockets. Sole Techonology employees know now that they won't get their IT-funded wish lists filled immediately or without questions. Instead, "you've got to come to the table proving why you need something and presenting a good business case [for the steering committee]," Bock said. The idea is to cut out the "cosmetic" requests, to "really cut out the nice-to-haves and the want-to-haves," he added.

Simple? Yes. But Bock has started making inroads on his $6 million IT budget and said he expects more as he goes forward, cutting back on third-party services and further consolidating his infrastructure.

5. Don't look to virtualization as a buzzword bailout.

The past three years have seen huge jumps in virtualization for enterprise-sized businesses. And every week brings another manufacturer wooing the midmarket with promises of virtual networking, server and storage options that will make IT life easier and cheaper.

But diving without looking, especially in a rush, will just leave you worse off than when you started, said Mary Johnston Turner, a senior analyst of market research at The Enterprise Strategy Group Inc. in Milford, Mass.

"Our studies show that use of server virtualization tends to drive up storage requirements, which means IT managers really need to implement consistent and automated solutions for managing files and consider the use of tiered storage," Turner said.

Before pouncing on virtualization, Turner said, consider the gold in automating routine operational processes. A recent survey found many CIOs telling Enterprise Strategy Group that they don't have the money or time for IT management automation technologies.

But the group's studies show that automation does save staff time and improve service -- helping with the bottom line.

"Organizations that make extensive use of automation for both specific tasks such as software upgrades and implement cross-domain run book automation are six times more likely to report that their IT organizations are effective and efficient," Turner said.

If anything, automating and streamlining tasks is a must for an IT shop looking to implement server virtualization down the line, Turner said.

"Trying to control costs of complex emerging technologies using last-generation management tools and processes is a sure route to failure," she said.

Let us know what you think about the story; email Zach Church, News Writer.

Dig Deeper on Small-business IT strategy

Join the conversation


Send me notifications when other members comment.

Please create a username to comment.

One way to cut some dollars from the budget is to tele-conference instead of travel. With many software packages out there to users there are a lot of business trips that could be done electronically. In some cases you still want the face to face to present yourself. I know of some people who look forward to trips where they get to dine on the company dollar and have a mini vacation as well. It may be considered a perk for some but if it means one person has fun and another has to lose their job due to budget cuts....That's wrong.
I'm always surprised at how many articles and advice pieces get written about trying to cut IT costs, but how few are written about how to use IT to accelerate the business and impact the top line. 
I agree Brian, cutting an IT budget can hurt company growth and impact your image in the business world. If you make too many cuts you will not have the staff and tools to expand your offerings and may lose the ability to keep or attract new customers. It's a dangerous line.
I think that the key to an organizations success is to really take a look and align their IT spending and infrastructure, in whatever area necessary, to the actual business cases it cares most about. whether that be virtualization, micro-services, or any other initiative, it's vital to engage at both the current needs level and to keep an eye out for future developments that will remain competitive. It's good to be lean, but get too lean and you can't adjust or adapt. 
If the goal is to cut budgets, I think it's the wrong focus. I think there has to be a smart evaluation of IT needs before you start to slash the money used to keep things going. By making some decisions on how to be more productive with the existing funding, you can probably save some money and keep your IT team intact.
I have always attempted to manage my IT budget the same as I would my own personal finances.  And if you can think that way, then you can have a successful organization.

With personal finance, you would make changes to the less important things - you might cut out some of the groceries on your list, you might cut out specific vacations or expenses.  This is critical with IT organizations to look at where money is being spent with the least ROI.  Understanding the business value of the expenses within the organization help to drive the focus.

There was discussion on the focus on virtualization.  But this is a bigger challenge.  Many organizations want to keep up with what their competitors are doing.  And while this is usually a good concept, sometimes you have to look at which options make you more competitive in the market space.  Sometimes doing something completely different will achieve greater success than following the leader.  With that said, it's also important that you understand what new trends, processes, tools, needs, exist and which are critical to your company's future and this becomes an area of focus - which may require you to lower the priority of other expenses within your budget.

Many times you're at the IT budget "roulette board" and you're putting your money on areas where you think you can win.  Sometimes its the right one, sometimes it's wrong.  But at the end of the day, you have to ensure that among the wins and losses, you go home with money in your pocket.  Watch your trends, learn from history, and be prepared to take the tough decisions if needed, especially if budget gets cuts more than you had expected.
The article seems to be aiming at senior management and executives. And it does have some useful examples.

However, there's an idea that shouldn't have been missed:
involve your team.

There are countless little inefficiencies, and people at the grass roots know them very well. Trust and empowering can bring a big cost saver without cost cutting.