Shrinking IT budgets: How to deliver more for less

The last two days at Bristlecone Pulse 2016 have been eventful and we had the opportunity to listen to industry leaders. Jeremie Davis and Tim Weaver from Del Monte foods talked about optimizing technology investments in supply chain; Richard De Souza discussed the digital transformation journey at our parent company, Mahindra Group; Angela Olson shared insights from the SAP IBP implementation project at Cargill; Nick Vyas, from the USC Marshall Center for Global SCM, shared his ideas on how disruptive technologies will shape the global supply chain; and Rob Quinn from Cepheid discussed how to avoid putting value at risk in large-scale implementations. Bristlecone’s very own Ramesh Sivakaminathan threw light on Innovation at Bristlecone and Netflix co-founder Marc Randolph shared the recipe to make our company think like a startup. It was a great learning opportunity and I am sure all participants went home enriched. I thank all of them for making Pulse a success.

Technology, almost always, needs investments to move forward, but what can be done, or rather should be done, when money is not easily available and budgets are tight? We need to do more with less…

According to a June 2015 article, Analyst firm Gartner reported a decline of 5.5% in global IT spend. Many organizations are dealing with shrinking IT budgets due to the current economic climate. In many industries, IT spend is shrinking because of other organizational priorities and constant focus on increasing revenues—without additional investment. For example, in FMCG and electronics companies, focus is on customers and increasing revenue through marketing. Similarly, in manufacturing, particularly auto and discrete industries, focus is more on driving efficiencies in production processes and meeting service levels. Therefore, budgets are allocated to inventory management, lean practices, etc. Overall, an organization’s IT budget depends on multiple factors—state of the economy, the sector in which it operates, and its financial condition.

IT spend is almost directly correlated with economy. During difficult economic conditions, it is the first to be curtailed. IT managers are under pressure to increase the efficiency of operating, extending, and maintaining IT applications.

Shrinking of IT investment is reality in today’s business environment and we really need the best ways to deal with it. A strategy for the times, when IT budgets are under pressure, should focus on the following areas –

Prioritize the spend based on business objectives and current IT gaps – In case of shrinking budgets, the first step is to prioritize business objectives and determine what needs to be handled as near-term priority. This will help in getting rid of non-critical issues which can be handled at a later stage. The current gaps in the IT infrastructure also need to be assessed to find out whether we already have an application to cover some requirements without increase in budget, or do we have something that can do the job with minor hacks or upgrades. Resourcefulness and strategic assessment of the current IT infrastructure will go a long way in helping us do more when the budgets stay shrunk.

Return on Investment (ROI) – There is a need to examine the ROI in terms of both, dollars spent and effort. Sometimes, we have the ability to put in the effort, but not the budget. If existing teams can chip in with some custom development that can help us solve a couple of the IT issues we need to address immediately, we don’t really need to spend. If team size is also a constraint, cloud-based, subscription-based model, or open source solutions should be explored. Using cloud-based and open source solutions can help in saving licensing costs, speeding the development process, and improving flexibility.

Time – As IT is increasingly becoming a robust business enabler, the need of the hour is a quick, stable application that does the work. Infinite timelines and patience have become things of the past. More often than not, the timelines shrink with the budgets. We need to check how long new tools/technology will take to become stable. First, the quick and easy-to-deploy solutions should be examined, after which one may move to large, complex solutions as per priority.

Use green technology – Organizations can implement green technologies like server virtualization and upgrade their hardware to Energy Star rated hardware. It will definitely save money, perhaps in a slightly longer term if not immediately. Virtualization is a process of combining multiple systems or servers to run on a single server or device. Organizations need to use virtualization to combine several physical servers into a single server, saving the cost of hardware, and providing long-term cost savings for ongoing maintenance, management, and energy usage. Additionally, virtualization is also possible for networking devices, disk storage, and even desktops. Consequently, virtualization helps in achieving more with less hardware and less management.

Finally, we can see that managing a shrinking IT budget is challenging, but more can definitely be delivered from less: with a bit of a strategic planning, practical approach, and resourcefulness.