CIOs Putting IT Services at Risk Through Short-Term Cost Cutting

London (2 June 2009) - A third of businesses are under severe pressure to cut costs and are looking at their IT operations for double-digit savings, according to a survey published today by global management consultancy A.T. Kearney.

The survey, entitled 'IT in the Downturn’, examines the challenge posed to corporate IT functions by the current economic difficulties, and whether the cost cutting measures they are making will be effective or even sustainable when faced with the possibility of a prolonged recession.

The survey found that 75% of organisations are relying on short-term tactical measures to deal with the downturn – such as deferring spend or cutting back on discretionary expenses – to contain expenditure rather than cut costs that stem from inefficient ways of working. Few are using the downturn as an opportunity to reduce the complexity that has built up in their operations following a decade of business growth and technological change, and take bold steps to streamline and optimise their assets.

Commenting on the survey, Farhan Mirza (Head of the UK Strategic IT Practice at A.T. Kearney) said: “Although an ad-hoc approach is easy to implement and delivers short-term cost savings, it is unrealistic to expect that such savings can be sustained in the long-term. Significant cost reduction often requires a comprehensive review of the underlying drivers of IT cost, with a particular focus on the management of applications and external services.

Many organisations have already addressed the low-hanging fruit, such as contract labour. In addition, most organizations need a comprehensive program that also addresses the underlying cost issues – such as the application portfolio or demand management. Without these initiatives, there is little room to manoeuvre if the economy deteriorates further. In that eventuality, a second bout of cost cutting will be quite brutal and leave the IT organisation struggling for many years to come. CIOs need to seize this opportunity to reduce complexity and rationalise the technology footprint to make fundamental changes to their IT cost base.

Notes to Editors

IT in the Downturn Survey – Methodology
The Survey was conducted in association with CIO Magazine over a period of 6 weeks at the start of 2009. Respondents were predominantly CIOs, CTOs and senior IT management with responsibility for their organisation’s IT operations.

A.T. Kearney is a global management consulting firm that uses strategic insight, tailored solutions and a collaborative working style to help clients achieve sustainable results. Since 1926, we have been trusted advisors on CEO-agenda issues to the world’s leading corporations across all major industries. A.T. Kearney’s offices are located in major business centers in 36 countries.