I would not have anticipated that using an 8-person IT shop as an example of how to address the "more with less" dilemma would be very helpful. The theme is the same, but the measures you need to take will not necessarily be the same in a large or even a medium-sized IT organization. I think the challenge is much greater in the smallest organizations because they are likely to already be running fairly lean. That being said, I really like his plan. I hope it works in this small-sized example.
It is the larger organizations that provide the most opportunity to do more with less - simply because of the decades of wasteful IT spending and inefficient business practices.
I was asked a very similar question yesterday as a Panel Member at the CIO Academy held in Sacramento for State IT Leaders. The question was, "Where are we going to find the time and resources to make these "overdue" process improvements while we are cutting back staff and asked to continue to meet current if not increased service levels."
My answer was fairly simple:
1) The most immediate gains will be from establishing the IT Governance and oversight to quickly and effectively identify those IT efforts that should be stopped (think Portfolio Management). Many organizations have IT departments serving multiple masters. In such a situation there is a high likelihood of unnecessary, redundant and even conflicting efforts. By advocating and fostering collaborative decision-making, organizations are far more likely to use highly constrained IT resources on the efforts that best serve the overall enterprise. (And identify those efforts that should be killed.)
2) If enough efforts cannot be immediately stopped, it may be necessary to endure a small, temporary spike in resources to get the process-improvement ball rolling. Identify as many "quick hits" as possible in these efforts to provide some immediate value back to the enterprise.
Frankly, I was impressed by your CIO-friend's plan in this blog posting. I am not sure how well these steps will work in such a small organization, but they would be great recommendations in a large organization. I obviously agree with his plan to determine what is really necessary and I especially liked the concern regarding the desire to "turn it all upside down in a day." Process change is incredibly difficult and it takes time - even if you have the very rare knowledge and experience in the widely neglected discipline of process and organizational change management.
Steve Romero, IT Governance Evangelist
http://community.ca.com/blogs/theitgovernanceevangelist/ 
