Less Is More, Up to a Point

By John McCormick Print this article Print

Has the cost cutting gone too far? Warning signs that your technology budget has gone as low as it can go.

Have you cut too deeply?

Arnold Testa, chief information officer of the Electronic Power Research Institute (EPRI), a Palo Alto, Calif., firm that provides research and development services to energy companies, says EPRI might be on the verge of finding out. His budget has been cut by 35% over the last four years.

Testa's desktop support has fallen from 14 people to 7, and remote users can largely forget about help. "We've been very aggressive, but service levels could begin to suffer," he says.

Not all technology executives are as worried as Testa. Many overseers of corporate technology are content to cut until they see bone. The expectation appears to be that Moore's Law applies to information management. Meaning: Budgets will keep going down and productivity will relentlessly be expected to go up at the same time.

Aware of the pressures, some technology executives are recasting what they do with budgets. "It's not about cost cutting. It's about creating value," says Scott Griffin, Boeing's chief information officer. To Griffin, creating value is implementing technology projects that have a business-wide impact on profits and revenue.

What is "value"? It can be many things. But in the end, it really is a spin on Moore's Law. It means getting more for less.

But cutting costs too far can backfire, as Interstate Bakeries found out when it tried to boost the shelf life of its Wonder Bread to cut costs and landed in bankruptcy. According to executives gathered at the Society of Information Management's SIMposium conference last month, here are some signs you have cut too far:

  • Services provided to customers and employees are declining. Over the past few years, CIOs cut their hardware and software maintenance budgets and support staffs to the point where many systems were in danger of breaking down, says Stephen Minton, director of worldwide research for International Data Corp. Companies are increasing budgets, Minton notes, "but any new wave of cost cutting could be catastrophic."
  • It's a sprint just to maintain day-to-day operations. "When it's a wind sprint every day just to survive, you've gone too far," says Mike Hugos, chief information officer at Network Services in Mount Prospect, Ill., a firm that sells janitorial supplies. Hugos gauges whether his 11-member staff is too thin through intangibles such as employee morale, repeated mistakes and hours worked well above 40 a week. During August, Hugos' workers put in at least 60 hours a week to create e-commerce links and procedures for a large customer. Hugos has one employee devoted to adding new suppliers, and he asked to be copied on each e-mail with that customer. The conclusion: Network Services couldn't get the customer up as quickly as it wanted.
  • Necessary upgrades don't happen. Sure, you can stretch out product life cycles, but eventually old servers, software and desktops lead to higher maintenance costs. Vendor support also wanes. "We're in the position of having to postpone software upgrades to new releases. That means you get less troubleshooting and support from vendors," says Testa, who has standardized on PeopleSoft.
  • You can't think big or move quickly. Do you have the resources and management support to implement that radio frequency identification system or the inventory intranet linking 300 suppliers? Preoccupation with playing catch-up day-to-day could ultimately hurt your business.

    Christopher Feola, CIO of AskSam Systems, a Perry, Fla.-based document search company, says executives need to prepare for a time when chief executives will ultimately ask, "How do we grow the company?"

    Are you ready?

    This article was originally published on 2004-10-01
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