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 [email protected].
