CXO

How can you weather your clients' shifting IT spending habits?

The economic fallout probably has many of your clients taking a hard look at how their IT dollars are being spent. Read some expert predictions about IT expenditures and find out how you can ensure a future with clients who are looking for ways to save.


In a February 2001 survey released by Stamford, CT-based Gartner, 65 percent of 510 large-enterprise CIOs reported that IT spending will increase at their organizations this year. Of those, the average increase reported was 13 percent.

That’s encouraging news for the IT consultants who rely on their clients’ technology expenditures for their own survival.

It’s important for consultants to note, however, that while companies aren’t necessarily spending less money, they are spending it differently. Although many companies will now outsource more IT functions than ever, they will seek alternatives to hefty price tags on consulting services.

This article will explore the changing face of IT spending and what consultants should do to survive this evolution.

  Doing More with Less
    Do you need creative solutions for stretching your IT dollars and making wise purchasing decisions? Check out our collection of articles for advice on outsourcing, planning projects, working with vendors, and increasing efficiency.  
       

    Do you need creative solutions for stretching your IT dollars and making wise purchasing decisions? Check out our collection of articles for advice on outsourcing, planning projects, working with vendors, and increasing efficiency.  
       

IT investments must show immediate returns
Joe Auer—president of Winter Park, FL-based procurement consultancy International Computer Negotiations Inc.—predicts that with the economy slowing, "There are four things companies are going to be looking at this year: business need, cost, complexity, and risk.”

IT executives who are under pressure to cut costs are likely to start with operations and maintenance, or recurring IT costs.

Those areas that improve efficiency and cut costs—such as security, professional services automation (PSAs), and server consolidations—will remain the top IT investment priorities for many enterprises. Projects that fail to deliver an immediate return on investment—such as ERP and application integration projects—will be put on the back burner.

In addition, companies will begin outsourcing functions previously handled in-house, such as network management and telecommunications support. At the same time, they’ll bring those activities that were previously outsourced back in-house, such as application development.

Streamlined and offshore consulting engagements are the wave of the future
For North American companies trying to save money, many will enter outsourcing engagements with contractors and consulting firms in other parts of the world, says Mohamed Hashim, a senior customer relationship management (CRM) consultant with Cambridge Technology Partners in Bangalore, India.

Newark, NJ-based Prudential Insurance Company of America, for instance, has replaced expensive U.S. consultants with IT workers at a new development center in Ireland, which is expected to save the company $20 million to $25 million annually. The Irish Industrial Development Agency—an organization that encourages foreign enterprises to expand their businesses in Ireland—helped to set up the facility. AT&T, 3Com, Compaq, Computer Associates, EDS, Microsoft, Novell, Oracle, Sun, and many other Fortune 500 companies have also sent work there.

Likewise, “The economic downturn in the United States has effected India positively,” Hashim said. Currently, CRM and back-office integration are on the upswing for India’s consulting organizations. Those India-based firms are striking deals to deliver IT projects for U.S. companies in the auto, health care, finance, banking, and insurance industries.

“IT training in India is more pronounced and focused than it was a little while ago," he said. "A learner is brought up to international standards even if they are not prevalent right away in India. Organizations that are outsourcing projects [overseas] to save money are definitely doing so without having to compromise on quality.”

Other companies are simply paring down the sources of their consulting contracts. Panasonic Management Information Technology Services, for instance, previously hired consultants and temporary employees from about 30 sources. Now, all of Panasonic’s requests for supplemental staff flow through a single company, Princeton, NJ-based JobReq.com Inc. Gartner predicts that other companies will follow suit and stick with one source for their consulting needs.
During March, TechRepublic is running a series on how IT divisions can spend less but still fulfill their critical missions. Visit our briefing center to learn more.
How can you survive these changes in IT spending?
So how will the most nimble IT consultants react to these changes?

Foremost, says Hashim, it’s imperative for a consultant to understand the business ideals and goals of the contracting organization. That will allow him or her to find areas where money can be saved.

“For consultants, time is money,” Hashim said. “So the first and foremost [criterion] is to make the client understand that he should help in getting maximum [productivity from a consultant] in as little time as possible.”

Unless clients and consultants understand each other, a communication breakdown—and subsequently, an end to the engagement—is inevitable. “Communication breaks down when each of the parties begins drawing lines of control,” Hashim added. “Show areas of the business where there is room for improvement [i.e., cost savings], and you’ll earn the client's goodwill.”

And don’t make the mistake of promising too much to your clients, warns Iain Wyder, an e-business consultant with Pilgrim's Estate Consultants—a British Columbia-based provider of marketing services to clients wishing to integrate the Internet into their marketing plans.

“I hear those annoying ‘smiley promises,’ [from consultants] offering soup-to-nuts service,” Wyder said. “Such claims are leading us to a situation where we are observing the equivalent of a firm of precision surgical steel manufacturers instructing surgeons on how to conduct heart surgery.”

Wyder added that those IT consultants “obsessed with the long view but without the in-depth knowledge and technical skills to get projects up and running” are less likely to survive than those who can simply demonstrate a tangible cost savings to their clients.

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