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Time to review IT budgets

By Fred McClimans
Network World Fusion, 10/01/01

Even before the terrorist attack of September 11th, the economy was in a slump. Today, of course, it's in much worse shape

Over the past two weeks, we've lost an estimated 100,000 jobs across a number of industries, and that number will surely increase as we continue to feel the true economic impact of the attack . Even with a taxpayer bailout, the airline jobs lost are unlikely to be recovered anytime soon - let alone all the lost jobs across the entire travel industry, from hotels to taxi companies. When that ultimately trickles up to the rest of the economy, we will likely see layoffs and depressed corporate earnings in other sectors as well (i.e., automotive, housing, retail, telecom, etc.). And let's not forget the decrease in tax revenue that many states and local governments are about to face due to decreased business in their community (such as lost trade shows, decreased taxes on wages, decreased taxes from airline departures, etc.).

Given the uncertainty right now, it is understandable that many firms have frozen budgets in a wide range of areas, including telecommunications and IT spending. But to simply freeze budgets is the wrong approach. Rather, IT departments everywhere need to take a look at restructuring their expenditures.

First, I think that a temporary hold on budgets is probably valid. But IT departments should look for areas where they actually need to spend more dollar resources. In particular, network/storage redundancy, secure private networks, VPNs, encryption and security come to mind. After all, if we are to be faced with an ongoing war on terrorism, we must be prepared for a range of possible network/security breaches and outages in the face of an almost certain "second" attack. This becomes all the more challenging as many firms are now considering how to distribute their workforce away from the massive corporate building and into a more decentralized environment.

Given that we've frozen our budget levels, yet plan to spend more in certain areas as a result of recent events, it only makes sense that IT departments look for ways to cut certain areas to free up financial resources. But this is risky, because it sometimes takes money to save money.

By looking for lower-cost implementations, with a short-cycle ROI (in the months, not year), we can find ways to save money. The difficulty is that this often means showing other managers how an increase in the IT budget will save the entire company money. For example, implementing a new collaborative workgroup software tool may cost the IT department a bit up-front, but it is likely to save the rest of the company in travel-related expenses and productivity in the long run.

By looking at this type of cross-departmental strategy, and taking this as a corporate-wide opportunity to really leverage IT into new cost-saving areas, I believe we as an industry can significantly help corporate America weather this economic battle.