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Guest View: A rotten economy has a silver lining

By Mitch Bishop

August 1, 2009 — (Page 1 of 3)
It’s no secret that times are tough for businesses everywhere. IT organizations are under extreme pressure to cut costs, just like every other department. Is it time to panic? No.

There is actually good news coming out of this latest recession for businesses that can stay focused on driving efficiency gains. The organizations that execute well during down times will emerge with real competitive advantage when the economy turns around.

Your IT budget is getting cut, sure. But let’s analyze how your CIO is tightening his or her belt. Maybe he or she’s cutting discretionary projects that can’t deliver short-term ROI in 12 month or less ROI. Vendor contracts are also getting renegotiated at a time when better deals can be had. But CIOs need to do more.

The problem is that at least 80% of most IT budgets are dedicated to just keeping the lights on. This IT dial tone has been a perennial problem as companies try to innovate, but in a recession the maintenance of existing systems is an anchor.

In the last recession, many IT leaders cut as much as they could by focusing on the consolidation of hardware and data centers. Technologies like virtualization emerged as essential strategies to see these consolidation projects through to a successful conclusion.

Most IT organizations have wrung as much cost as they can from a hardware and data center consolidation strategy. So where is the next big opportunity to dramatically reduce costs? The answer is software consolidation, also referred to as application rationalization.

The last 20 years have seen businesses grow in silos, with associated disconnected business systems. Businesses have actually unwittingly encouraged this behavior by driving business unit incentives that trump larger organizational efficiency.

The decentralization of IT resources, along with a view of IT purely as a service organization, have led to gigantic application portfolios, the maintenance of which soak up the majority of IT budgets at many businesses. The merger and acquisition frenzy of the last few years have only added to the problem.

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