Research has found a lack of involvement by CIOs in the IT cost reduction programmes that are underway at most all organisations, suggesting that targets are being set by executives with only a limited understanding of the cost of IT services and the risks involved in tampering with delivery.
Research by Deloitte concludes that 84% of programmes designed to reduce IT costs in large corporations and government departments are reactive, with IT leadership rarely involved in setting cost reduction goals.
In a survey of 60 large UK businesses, 73% of large corporations and government departments were found to be cutting their IT costs, with a further 10% intending to carry out IT cost reduction initiatives in the future.
Some 50% were working to cut IT operations costs by between 5% and 10% and almost 20% by as much as 20% to 30%.
Two-thirds plan to see through their initiatives in six months or more, with returns coming over a 1-3 year horizon, the assessment has found.
Neville Howard, the Deloitte partner who led the research, said: “IT departments are scrambling to cut costs but are unwittingly storing up problems for the future. The ability of IT to support the business is in danger of being compromised.”
Contracts are being renegotiated by three-quarters of the companies polled, and half were planning reductions in contract and permanent staff.
Half of the survey respondents are planning to cut their contract headcount by between 50% and 100%. Permanent staff will also be affected, as 66% of organisations aim to cut their IT workforce by more than 10%.
Apparently, 70% of respondents have reviewed their outsourcing strategy in the last 12 months and over a half of all businesses contacted for the study plan more outsourcing of IT and business services.
The consultants say a key focus for IT executives needing to contain costs should be on the management of business demand backed up by a robust internal chargeback scheme.