CIOopinion
CIO OPINION
that the complete range of IT spend is
considered for rapid reductions.
6. Plan to do it once. Most organisations
don’t cut deeply enough the first time,
which means they often need to revisit
costs and do it again. This creates a
destructive and unproductive cycle of
uncertainty, effort and lost productivity.
This is particularly relevant for staff cuts,
where cycles of on-going reductions can
be especially dangerous.
7. Consider sunk costs. When it comes
to saving money, it is commonly said
that ‘sunk costs are irrelevant’ meaning
that future spend should be considered
without relation to past spending or
‘sunk costs’. From a rapid cost reduction
standpoint this is true, but it’s still worth
considering whether the saving will be
more than the benefit that can and will
be delivered by continuing.
8. Address discretionary and nondiscretionary
cost. Discretionary
spending, such as for new projects,
additional capability or services, is often
a seemingly easier place to cut.
However, even non-discretionary ‘run
the business’ expenses such as IT
infrastructure and operations can be cut
by reducing usage or service levels.
9. Tackle both variable and fixed
costs. Fixed costs are expenses
that remain constant, regardless of
activity or volume, such as office rent,
subscriptions and payroll. For fixed
costs, focus on elimination. Variable
costs change with activity or volume,
for example, telecommunications,
contractors and consumables. For
variable costs, focus on both reduction
and elimination.
10. Inspect accounts. Work with your
finance partner to obtain a solid view of
the expense level detail, such as expense
accounts and the key balance sheet
accounts, including expense accruals
“
EVEN NON-
DISCRETIONARY
‘RUN THE
BUSINESS’
EXPENSES
SUCH AS IT
INFRASTRUCTURE
AND OPERATIONS
CAN BE CUT BY
REDUCING USAGE
OR SERVICE
LEVELS.
and prepayments. Use this view to
identify specific cash reductions that will
immediately have an impact. •
46 INTELLIGENTCIO www.intelligentcio.com