Six budget-saving strategies for an IT project

Although dot-com companies have taken the brunt of the cutbacks, several other technology industry stalwarts have announced layoffs in recent months:

• Lucent Technologies announced that it will trim approximately 10,000 workers this year.
• Gateway Inc. announced its intention to reduce its workforce by 10 percent.
• Nortel Networks Corp. has said it will lay off 4,000 workers during the first quarter.

Other companies are also slowing the rate of growth of technology spending. A Morgan Stanley Dean Witter survey of 150 CIOs revealed that 16 percent of respondents intend to spend less on IT in 2001 than they did last year.

Budget cuts and layoffs can be a problem for IT managers who are faced with delivering the goods under difficult conditions. Just ask Suhasini Padmanabhan, an IT manager for an Atlanta-based healthcare firm, who says his company’s manpower resources are being stretched to the limit and that, “all the business heads want their jobs done twice as fast with half the money.”

This article will provide advice for managers like Padmanabhan and others who must weather the economic storm. We’ll describe a theoretical approach to improving the efficiency of IT projects and offer practical tips you can use to reduce the cost of your next IT project.

Three tips following the 80/20 principle
When IT managers are short on staff, budget, and time—they need to focus their efforts on the work that matters most. That’s the message from Richard Koch, the London-based author of “The 80/20 Principle: The Secret to Success by Achieving More With Less.” Koch’s view provides a framework for managers and challenges them to view their responsibilities and work with a new outlook.

The 80/20 principle presumes, “a small minority of forces—roughly 20 percent or less…account for 80 percent of what happens,” said Koch.

Koch cites the Internet as an example of this theory.

“The top five percent of Web sites, some 6,000 sites,” he said, “receive 75 percent of all visits.”

Koch believes that IT managers can leverage this principle to their advantage. He recalls how IBM gained its superior reputation in IT in the early 1960s when IT professionals at IBM found that 80 percent of a computer’s time is spent executing less than 20 percent of the operating code.

“IBM immediately rewrote its operating software to make the most-used 20 percent very accessible and user friendly. As a result, IBM gained a reputation of making faster and more efficient machines than its competitors, even though this was only true for a minority of functions—the ones that mattered,” said Koch.

He offers the following three ways to apply the principle to an IT project.

Simplify the objective
“It’s a safe bet that 80 percent of the value of any project will come from 20 percent or fewer of its activities,” said Koch. “Lesson [one]—a project is not a project. It’s always several projects. So before you start, simplify the task. Strip it down to one simple aim. Jettison the baggage.”

Impose a severe schedule
Koch recommends imposing tight deadlines. He believes that severe time constraints will force workers to function more efficiently.

“Only then [when you impose an impossible time scale] will the team identify and do the 20 percent that gives 80 percent or more of the value,” he said.

Design before you implement
“Another useful 80/20 hypothesis is that 20 percent of the problems with any project cause 80 percent of the cost or time overruns,” said Koch. “These usually arise in the design phase. So careful attention to design before doing anything is well worth it.”

Three tactical techniques to try
In the article, “Cutting IT Budgets: Tactics and a Survival Guide,” Gartner analysts Kurt Potter and John Roberts outlined practical techniques for IT managers who are looking for immediate cost savings. Here are three tactical tips they described that are helpful for reducing the cost of a project.

Renegotiate vendor contracts
“Vendors are often creative at avoiding price concessions during times of economic growth, but when times are bad for all, these same vendors are more willing to reduce prices by 10 percent rather than losing 100 percent of the business,” according to the Gartner report.

Taking this advice might not be as complicated as you might imagine. In the TechRepublic article, “An IT manager speaks out: ‘The most difficult budget challenge I’ve ever faced’,” IT manager Angel Martinez described how he successfully renegotiated with vendors and saved roughly $50,000.

Check your accounting methods
Potter and Roberts advise IT departments to adopt more accurate accounting methods. They wrote:

“Push costs to the business units that they can easily absorb and that seem insignificant to them but which are direct expenses they can identify. Although this practice will not optimize costs, the costs will now rest with their owners. Examples include paper, disks, and reports.”

To learn more about this method, read the TechRepublic article, “Are you charging your cost centers properly?”

Defer new projects
Consider a proactive approach to budgeting by canceling or delaying projects. Potter and Roberts recognized the implications of this decision when they wrote:

“More difficult judgments are required where projects are partially completed, especially if infrastructure upgrades are required. Evaluate cancellation and completion to minimum functionality.”

Get creative
There’s not one solution that would work for every department. IT managers need to rely on their own creativity to develop a plan to reduce costs during financially challenging times.

“IT managers must realize that productivity gains can be achieved from many sources—not necessarily from technological innovations or project-specific changes alone,” said Cynthia More, an independent business consultant based in Akron, OH. “They must train themselves to look beyond the obvious, to see the big picture, to think out of the box. That’s the only way they’re going to get through these lean times.”
Do you have a great tip to reduce the IT budget? Post a comment or send us an e-mail.