Showing The Payback For Improving Efficiency During Difficult Times

Via
Forbes

You Gotta Have A Plan
By Ed Sperling

With a recession looming, uncertainty in the credit markets and wild gyrations on the stock market, most companies are battening down the hatches to weather the storm.

That means it won't be long before the chief information officer gets a knock on the door--or more likely an e-mail--to come talk to the chief financial officer and CEO about what he or she is doing to cut costs. The general rule of thumb is that it's better to have a plan than to be given one. And it's better to say how you're going to cut costs than to be told your budget is being cut.

Forbes.com caught up with James Kaplan, principal in the New York office of McKinsey &Co., who has just completed an in-depth study on managing information technology (IT) in a downturn.

Forbes.com: Why should the CIO be concerned about a downturn?

James Kaplan: When business slows, there's a natural instinct to cut IT costs.

Is that because IT is one of the largest budget items?

The size of the expenditure varies greatly by industry sector. If you're in financial services or telecommunications, it can be a large percentage of revenue or operating expenses. In manufacturing, it's usually rather small. But in many cases, the instinct to cut IT in a downturn stems from the perception that it's largely discretionary. There's also uncertainty around the value. In organizations where there is more uncertainty and doubt about the value derived from IT, there is more of a tendency to cut when times get tough.

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