A Recipe for Effective Cost-Cutting
Everybody's had to cut costs in the recession, but that hasn't made it any easier. As Peter Whatnell, CIO of Sunoco and president of SIM, told me recently, many IT leaders have had to make painful cuts that "weren't well thought out."
Former CIO Insight executive editor Allan Alter and his colleagues at Accenture have a good idea for a remedy.
Their research finds that businesses outperforming their competitors in recessionary times share two characteristics: they take a more reasoned approach to trimming costs (more "cost management" than "cost cutting"), and then they take those savings and invest them in boosting their strategic position.
So they essentially create an upward spiral, the authors posit. But that's not an approach many have taken. Those that cut heavily fall into a trap described in the report:
"The risk is that IT organizations will fall into a dangerous downward spiral: budget cuts reduce IT capabilities; the value received from IT is thus reduced; confidence in the IT function diminishes; resistance to funding new projects builds; more cuts to the budgets are demanded--and so the cycle continues."
Accenture's report (PDF available) uses these examples to lay out an approach the authors say can help CIOs and business leaders create a cost-reduction model that actually feeds new investment.
Something interesting to chew on in these trying times.