EIGHT WAYS TO FIGHT IT BUDGET CUTS

The U.S. sub-prime mortgage crisis has investors waiting for the technology shoe to drop. So far, there are no indications corporate technology spending is softening, and most IT organizations have set their budgets for 2008. But the temptation to wield the axe in the direction of the IT department is certainly present. Technology has a bullseye on its back when chief executive officers seek to deliver earnings in tougher quarters.

Since 2003, when the software and equipment components of U.S. GDP took their largest fall in 15 years, most CEOs have viewed technology as a cost, not as an investment. But Accenture’s recent global technology research of over 500 chief information officers revealed just how critical it is for organizations to maintain their investment in technology if they want to outpace the competition.

Here are comebacks CIOs should consider if they’re forced to go to war for the future of their IT budgets:

1. Our customers are last in any line extending out the IT door. Customer facing systems were found, according to our research, to be among the lowest scoring and the poorest performing. In contrast, financial systems have scored the highest. Cutting budgets now would hurt the customer more than the CFO in IT support. While CIOs say they are spending approximately 28 percent of their application budgets on customer facing applications, this is meeting less than half of the technical and business needs of their organizations. Those businesses defined as “high performers,” who allocate the same proportion to customer facing applications, have invested in new technologies and in integrating customer applications that have met 90 percent of their business needs.

2. Cutting the fat from today’s already lean IT budgets cannot be done easily. Like with dieting, the first 10 pounds are the easiest to lose while the last 10 are the hardest. Companies have been pulling all the levers since 2001: offshore, automation, metrics; reductions today would be about making tradeoffs on who gets refreshed and who doesn’t. The 2007 study showed that the overall allocation of discretionary and non-discretionary spending has barely budged compared to 2005. The study also shows that as an organization embarks on new technology investments, it should expect spending more of its time in IT operations as their optimized IT environment has been disturbed. While this may look like a step back to IT execution leaders, High Performers view this as a necessary step toward business innovation.

3. Potential hires will laugh at our technology. A time warp presently exists between their use of technology at work and at home. The study shows that for the first time, enterprise technology has fallen behind consumer technology. Companies once had the latest technology such as voice mail and e-mail. Now, the best technologies are used at home first and organizations are struggling to keep up.

4. Consumers expect more and are savvier than ever before – if we don’t provide it someone else will and our customers will vote with their mouse clicks. Data suggests that companies are less than half way to where they think they could or should be in terms of leveraging online interactions with customers, employees, and suppliers.

5. Those people responsible for maintaining our legacy system are headed toward retirement. Research shows that the oldest modules of front office systems driving profitability are among the oldest in an organization’s portfolio. They average over six years old (with some surviving code written in the 1970’s) and have survived well past their expected

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