Budget Stretchers

Use the pressures of the economy to your advantage.

Are you starting to put together your IT budget for next year? Try this: Save a bunch of money by bringing structure and administration to your infrastructure. Now, take those savings and give back half the money to your boss. Then take the other half to invest in new projects. Before you tell me what I should do with my idea, let me tell you it isnt my idea at all. This suggestion for how to get more miles from your current IT budget came from a conversation I had last week with the CIO of one of the worlds largest companies. Hes been applying it—with great success—for years.

Getting more mileage out of IT budgets is a topic that just wont quit. Its of interest to companies uneasily aware that slashing IT projects will limit future corporate growth as well as to vendors wondering when spending will return. My advice for customers is to leverage three current trends to get the most out of IT dollars. My suggestion for vendors is to adjust to the new reality rather than wait for the next economic bubble to appear.

Consider these trends:

First, the pricing pressure that has hit the general economy has hit the technology industry with a vengeance. In addition to falling prices and purchasing delays, the tech industry—and in particular the software industry—has had to deal with the advent of a low-cost competitor, named Linux, that is perceived as free. Software vendors have responded to the Linux and open-source competition by trying to shift the revenue stream to services. Customers can, and should, play the open-source card to get a lot more miles out of their software dollars.

Second, hardware prices are being driven down as never before. Companies such as Dell are able to set the pricing floor that other competitors have to match. Customers have ready access to pricing by configuration via the Web—something not available before the creation of online shopping.

"Customers are able to drive negotiations with vendors and have more advantageous negotiations," said Hugh Bishop, senior vice president of Aberdeen Group. "They are able to get more for less, and they are not under pressure to get a new product in and installed in the next 90 days. Long term, this is healthy, but it is a painful process for vendors to live through."

Third, outsourcing is on the rise. Outsourcing has expanded in recent years to cover a lot of territory. It includes hiring a company to come in and run your business, shifting your development and help operations to an overseas operation, and plugging into one of the companies trying to sell you utility computing. Each contains perils. Hiring a company to run your business will not work if your only plan is to save money. Shifting your operations offshore requires a thorough understanding of the pitfalls of a foreign relationship. Buying into utility computing without running a pilot program is like sticking your finger into a socket. However, there are also opportunities that did not exist when you were building your IT infrastructure in the past. Bringing outsourcing into your computing mix is one of the trickier but more necessary requirements in the current economy.

"You have to measure and monitor every aspect of your business. Processes that are strategic to management should be done internally; other less strategic, but complicated, processes such as payroll are better done outside," said Martin Reynolds, a research fellow at Gartner.

Gartner contends that business process outsourcing has been one of the brightest growth areas in an otherwise-lackluster technology market. The research organization says new technologies and media are allowing outsourcing of entire new areas, including online payroll, online benefits administration, online order management and online transaction processing.

Understanding the impact of open-source alternatives, paying attention to the role that falling prices are playing in hardware negotiations and bringing outsourcing into your architecture mix can provide budget-stretching opportunities that werent available a few years ago—when times were flush.

Eric Lundquist can be reached at eric_lundquist@ziffdavis.com.