How IS Organizations Can Survive Cost Cuts

Getting Down To Basics

"Cut costs" is the rallying cry for businesses trying to re-establish a financial balance. All sectors of an enterprise must play a part, but, over time, this is a wasteful "roller coaster ride" for IS departments and they need a strategy to minimize the effect.

To most line organizations, cost cutting means less operational output. For many administrative support organizations, budget cuts probably wouldn't be noticed at a business unit level, but they would affect the bottom line. However, the IS department facilitates the daily running of all the other line organizations, which makes cost cutting decisions particularly difficult for IS.

Every strategy needs an objective, but cost cutting directives are brutally generic. An IS strategy needs to be more specific. Gartner surveys show that 60 to 70 percent of a typical IT budget goes toward IT operations, the remaining 30 to 40 percent is used for managing business process change, that is, applications. Cost cutting discussions are very different in each domain and an IS strategy must reflect that.

From a customer perspective, IS serves the enterprise with two key deliverables:

An IS strategy has to make businesses understand not only the costs associated with these deliverables, but the level of service being supplied. Costs are easy to evaluate; service levels are less so.