Cut carefully

Where to scale back your network budget while leaving big projects intact.

By -Sharon Gaudin
Network World, 01/29/01

While network budgets look to be on the rise this year, a softening economy may have some IT managers trimming their budgets and struggling to keep major projects and routine maintenance on track. Analysts and IT executives say that's possible to do, but only if you start thinking about the cutting well before the axe has to fall.

"Moving forward, there will be some of that," says Isaac Applbaum, president of Concorde Solutions of Concord, Calif., a subsidiary of Bank of America. "You have to be prepared. It's about being more selective of the projects you undertake and knowing where to scale back so it doesn't affect operations or plans."

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However, analysts agree that there's no way to make budget cutting simple or painless. The best way for IT managers to proceed is to keep themselves out of those situations. A study by Giga Information Group shows that IT, still often seen as a cost center, is one of the first departments to feel the call for budget cuts. That means part of an IT manager's job is to educate upper management about the cost savings and revenue that IT generates.

The Giga report even suggests producing a monthly report card listing every IT project or initiative that generates revenue or cuts costs.

Applbaum says that kind of management education is a constant part of his job. "More and more IS folks have business backgrounds," he says. "They can talk toe to toe with the CEOs about the business. I think every department is going to fight equally. There's going to be some interesting executive plays, and we're generally looked at as an expense. We have to fight for what we need."

After the skirmishing has cleared and the official call for budget cuts comes down the line, there are some basic steps to take. Giga analysts recommend these measures:

Think about bonuses instead of salary increases, which also increase pension and 401(k) contributions, as well as unemployment compensation contributions.

Be aware of the expenses associated with the outsourcing process, realizing that the average outsourcing contract involves six months of investigation, sales cycle and negotiation. That can cost the average midsize company $150,000 to $200,000.

Make sure the training programs being paid for are actually being used, but be aware that eliminating key educational opportunities could be a bad idea in a tight labor market.

Delay technology implementations or upgrades.

Jed Proujansky, director of IS at Pioneer Management Systems, a third-party healthcare administrator in Holyoke, Mass., says upgrade delays generally are one of the first things he thinks of when it comes time to cut his budget.

"We have PCs that are three years old," he notes. "We may stretch them another year. . . . A lot of other expenses, like our contracts, are fixed expenses and that's sort of set."

Renegotiate contracts. Brent Masters, a system administrator at Ink Enterprises in Little Rock, Ark., a $4 million screen print and embroidery company, did this as part of his recent cost-cutting efforts.

"We just went through some of this," Masters says. "Somebody else approached me and wanted to bid on our business. I was able to call our ISP and say, 'I've had somebody offer me this.' I haven't had a problem with our service, but it's hard to ignore something like this."

Masters says the pricing negotiations worked. He stayed with his original service provider and is getting his company a better deal.

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