Professional service firm Ernst & Young has warned companies to take care in cutting their Information Technology (IT) budgets, at a time when economic conditions force many companies to curtail spending just to survive.
Says Marius van den Berg, Director for Technology Security & Risk Services at Ernst & Young: “It is important to remember that ever since the deflation of the tech bubble following the rampant spending that preceded Y2K, IT spend has been under tight scrutiny. There may be some cost savings inside the IT function but the chances are that these savings are not likely to directly correlate with the percentage of the budget that IT makes up,” he says.
He explains that rather than simply dictating a simple percentage to be cut from the IT budget, companies need to look at what they would be willing to sacrifice in order to deliver the desired savings.
“Many of the services that IT delivers to the business are based on service level agreements between the business and the IT department or external service providers. If the business wants to cut these costs then it will have to look long and hard at what the implications of this would be on the performance of business units.” he comments.
Additionally, companies should be wary of sacrificing their ability to innovate by cutting budgets for exactly those technology solutions that foster innovation and collaboration.
Van den berg continues: “In all companies there are systems that simply provide the basic infrastructure to allow the business to continue running and not keeping up with the latest and greatest technology will not have a real impact on these systems. Email is a good example of one of these services as there is little to be lost from delaying an upgrade to a mail system if the needs of the business do not dictate it. However, if there is a strategic and competitive advantage to be derived from deploying the latest version of a particular system then delaying this implementation could be catastrophic in the longer term,” he explains.
Technology must also not be underestimated as an enabler of efficiency and cost saving. Cutting IT budgets might have the downstream effect of driving up the cost of processes made less efficient without appropriate tech infrastructure.
Simply targeting IT because of its high cost could result in businesses being ill prepared to take advantage of opportunities that may present themselves in the near future.
