Today’s financial crisis requires companies to be even more conservative with spending than they would be otherwise. Budget cuts may be mandatory, so how do you get the most of your available dollars?
“When a slowdown is evident, you must take the driver’s seat and determine the best actions to keep the company efficient and operational,” states Bill Dvorak, Chief Financial Officer for CIMCO Communications.
Smart Business asked Dvorak about best practices and managing IT functions in an economic downturn.
What are the first steps IT executives should take when faced with a recession?
In times of heightened economic concern, management should take the opportunity to become a leaner IT organization. As a CFO, I am always paying attention to the return on investment (ROI) and pay-back on technology initiatives. In order to achieve both in a tight economy, it’s important to take a fresh look at spending and concentrate resources in areas you feel will be most impactful. Since a majority of an IT organization’s customers are other internal departments, it’s essential to meet with each of those stakeholders and determine the must-haves versus the nice-to-haves.
Once input from your internal departments has been reviewed, you can determine where to tighten the budget while still making a positive impact. Provided an initiative meets the desired ROI goals, you should proceed quickly. Keep in mind that the most desirable projects will be those that give you a quick pay-back, ideally within one year.
What are the most effective methods when decreasing expenses?
The whole company must be thinking ‘cost control.’ Discretionary expenses, such as entertainment, should come under sharp scrutiny. As an IT executive, you can do your part by consolidating and/or moving to newer, more cost-effective technology. Another method of decreasing expenses is to review your technology vendors to see if you can find any cost efficiencies. This is a time when small to medium-size technology vendors may be willing to make additional concessions just to get your business. It’s in times like this, when your vendors really want and need your business more than ever before, you can be shrewd about your requirements and negotiations.
How does this type of economy affect the staffing of an IT organization?
When the rest of the company is tightening their belts and becoming leaner, the IT organization will be expected to follow suit. One option is to use consultants to help complete critical projects so you don’t have to take on the cost of a new employee. Given the state of the economy, you should be able to negotiate consultant rates. I also strongly recommend fixed-price quotes. Another trend for controlling head count is using existing IT staff to take on multiple roles and fill ‘hybrid’ positions. By matching existing skills of your in-house talent with emerging roles, you will be in much better shape when economic times improve. You may need to invest in some training, but you haven’t lost the high value of an experienced staff and institutional memory. This is much less costly than recruiting new staff with highly specialized, technical abilities down the road.
How do you ensure IT budgets are still adequate and used effectively?
Keep projects focused on a one- to two-year payout or make many small projects out of a large one. This will allow you to keep working on larger projects that you know are a necessity without having to fund them all at once. Remember to look at the ROI of the project at different times throughout development to ensure that the payback you were expecting in the beginning of the project will still be there when it is completed. Finally, as objectives throughout your company may change more frequently now than in more stable times, be sure to check in periodically with key stakeholders to ensure the expectations and requirements are still on track.
How to do you reconcile short-term goals without losing sight of the long-term picture?
While you are making short-term cuts to streamline your organization, keep an eye on the long-term goals. When you start planning for the coming budget year, ensure that the changes you are making today positively affect your goals for tomorrow. No matter what happens in this economy, you still have a responsibility as an IT organization to support critical operations. Just make sure that when you are tightly managing costs, you take care not to compromise quality. It can make the difference in how well your business comes through in challenging times. Discipline established in tough times will help maximize resources in the good times.
BILL DVORAK is Chief Financial Officer of CIMCO Communications, based in the Chicago metropolitan area. He is available at (630) 691-8080 or firstname.lastname@example.org.