CIOs need to improve cost-cutting strategies

CIOs need to make fundamental changes to their cost base to survive the recession

Corporate IT functions are being put in jeopardy as chief information officers (CIOs) resort to short-term tactics to counter the downturn, according to research.

The survey by consultancy A.T. Kearney suggests that a third of UK businesses are looking to generate double-digit savings from their IT set-up.

Out of the 82 IT decision-makers polled, 75 per cent are looking at measures that provide a quick payback, such as deferring spend or cutting back on discretionary expenses.

However, the study also suggests that few CIOs are using the current climate as an opportunity to simplify their IT operations and streamline and optimise their assets.

“Although an ad-hoc approach is easy to implement and delivers short-term cost savings, it is unrealistic to expect that such savings can be sustained in the long term,” said Farhan Mirza, A.T. Kearney's head of UK strategic IT practice.

“Significant cost reduction often requires a comprehensive review of the underlying drivers of IT cost, with a particular focus on the management of applications and external services.”

In addition to tackling the need for cost-cutting through easier routes such as reducing the use of contractors, companies need to widen their focus to areas that address underlying cost issues, such as application portfolio or demand management.

“Without these initiatives, there is little room for manoeuvre if the economy deteriorates further – in that eventuality, a second bout of cost-cutting will be quite brutal and leave the IT organisation struggling for many years to come,” said Mirza.

“CIOs need to seize this opportunity to reduce complexity and rationalise the technology footprint to make fundamental changes to their IT cost base," he added.