Due to the dramatic downturn in the global economy, Hewlett-Packard (HP) announced a reduction of 50,000 people last October, and AT&T followed in December with a 12,000-person cutback. On Jan. 22, Microsoft announced a 5,000-person reduction, with other companies planning equally large layoffs.
As technology vendors downsize support staff, close field offices and reduce production capacity, these massive reductions are beginning to cause unintended consequences within the IT community. Fewer customer service people will be available for support calls; we'll see fewer new product releases; only the highest-priority bugs will get fixed. It is clear that during the next 12 to 18 months, as budgets are further cut and vendors continue to downsize, IT organizations will need to be more self-sufficient and cost-effective than ever before.
Most IT organizations have gone through economic downturns. However, this decline is a different animal. It is deeper, broader and already longer in duration than any previous downturn of the past 60 years -- before most IT organizations existed. Back in the 1950s, a telephone, a Xerox machine and a typewriter were state-of-the-art technology. Printers were companies with big presses, a BlackBerry was a fruit, and networks referred to radio and television companies.
This economic downturn hits at a time of great dependence by organizations on IT systems and skilled personnel to support them. Network outages must be avoided due to a loss of productivity and profitability. Client self-service solutions (Web portals, kiosks and voice response systems) must remain operational 24/7 to avoid a severe customer backlash and revenue drop. Email must be delivered reliably and quickly.
How can IT organizations and professionals respond to economic consequences beyond their control? Fortunately, there are several ways, many of which are smart business.
How IT management can respond:
- For low-value IT projects, cancel or suspend all project teams that will not provide tangible revenue or cost savings in the next 45 days. Redeploy team members and project managers to projects that will deliver benefits in four to six weeks.
- Offer a special bonus payment to your top five engineers if they can improve the transaction quality for low-quality IT services by 100%.
- Respond to lower IT budgets by reducing wasted time supporting defective software.
- To address customer requests for project information, set up project portals to store files, test logs, drawings and so on for 24/7 client access. Stop weekly status meetings in favor of a weekly refresh of cost and schedule data on the portal.
- Respond to "green business" requests by putting routine employee correspondence and policy files on a secure server for Web access instead of printing paper documents.
- Outsource routine IT support services (email services, network operations, printer support, etc.) to qualified suppliers on a fixed-fee basis. Use Web 2.0 apps and cloud computing services to minimize local equipment dependencies.
- Provide IT services that generate income and look for ways to add 5% to 10% in profit from every transaction or client contact.
- Deploy and update client self-service kiosks or websites to respond to increased customer service needs.
- When making staff reductions, retain staff members with knowledge and expertise that can't be outsourced -- keep generalists that can support many different technologies.
- Don't cut only highly paid staff. Paying someone $10 less per hour is not a cost savings if they can't do the job done by a more senior worker.
- Replace contracts that have variable rates with fixed-fee or on-demand contracts where you pay only when services are used. Avoid contracts with retainer fees and low-use penalties.
- Reduce yearly software license fees by moving to respected open source software products, if applicable to your applications and security environment. They may be able to do 90% of what you need at 5%of the cost of proprietary software.
- Respond to requests for new hardware by redeploying old hardware. Assuming it still runs, use that Pentium 3 for a print server instead of leasing a brand-new quad core system.
- When advertising budgets are reduced, provide digital tools and expertise to implement viral marketing techniques, update social networking sites and host sales webinars.
How IT professionals can respond:
- When project managers ask you to help struggling project teams with cost or schedule overrun problems, use your years of experience to lower the project costs.
- Offer users in need of support suggestions that reduce user cost, time and effort.
- Respond to management requests for revenue-producing ideas with IT solutions that can save clients at least 10% per year.
- Reduce travel costs by suggesting a webinar or Netmeeting session. Use the 10 hours that would have been spent traveling to automate a manual process.
- When asked to pay for lunch for technology suppliers seeking sales opportunities, turn the situation into a partnership instead of a rodeo.
- Downsize your technology -- if you never use it, exchange that BlackBerry for one without a camera. Return an obsolete cell phone or laptop that goes unused.
- Expand your technical skills at minimal cost by taking classes at a community college or through an online degree program at home in the evenings.
- Cut printer costs by printing double-sided reports. Don't use color toner unless absolutely necessary for safety or contractual reasons.
- Help fellow employees who are redeployed with personal references and job referrals.
Small responses can be cumulative. For example, saving a box of printer paper per week at 10 offices can pay for the yearly leases of 10 laptop computers. Terminating service for unused cell phones and BlackBerrys can save $50,000 per year, even for small organizations. Stopping work on low-value projects can save $30,000 to $100,000 per month, assuming four to 10 people work on a project.
Many IT organizations and professionals have already made these changes. The challenge is to extend the model further into new areas. For example, IT organizations are starting to use social networking sites (Facebook, LinkedIn, etc.) as a channel for employee and client communications. The use of instant messaging (IM) systems such as Twitter as a replacement for expensive email portals is increasing due to its immediacy, low cost and device portability. The deployment of cell phones with unlimited long-distance minutes as the replacement for an expensive office switchboard system is gaining in acceptance.
Many of these technologies and strategies would have been implemented over time, but economic circumstances are forcing more rapid adoption. Given the dire economic forecasts for 2009, the financial consequences of not adopting at least a few of these strategies appears high. Even some of the most profitable companies -- like Google and Microsoft -- have announced plans to cut long-term costs (people, facilities, systems) they deem unnecessary.
IT organizations and professionals that are agile and adaptive can endure difficult economic times. They may decide to use old technology, install shareware or reduce Internet bandwidth. Behind the scenes, the computing solutions used to respond may not be pretty or new. But when the economy does improve, smart IT organizations will be around to enjoy their technical creativity and survival during these difficult times.
