Cost effective CIO

While you’ve recently recalibrated your expectations about IT spending to fit a recession, you also have to master the ability to do more with less, regardless of the economic cycle.

There’s only so much money to go around, and you have to make sure every dollar is well spent. As you read the tips culled from conversations with CIOs from various industries, it’s useful to remember that one industry’s typical profit is different from another. CIOs say ROI is the barometer by which projects get approved. Fast payback is a must. Anything considered long term can take a backseat. And answer no to new purchase pitches without regret. In general, single-digit returns are what you’ll find here.

The following six tips are for CIOs from the penny-pinching all-pros.

1 “Almost new” is better than you think

When its time to update your infrastructure hardware, CIOs always face a tough situation. As much as you would have liked to buy some spanking new servers and routers, your budget may not take the hit. In such situations, buying used or second hand hardware can be a plausible approach to cost-cutting. CIOs need to consider whether the equipment will meet users’ needs, and whether maintenance costs of such hardware are higher than on new gear.

2 Software upgrade? Forget about it

For many CIOs, the cost of updating and maintaining hardware doesn’t even come close to the numerous costs associated with software. There’s licensing fees, patches and service packs, maintenance, customization and frequent upgrades that hit the market faster than some companies can roll out the previous version. There’s an answer. Don’t upgrade. And look to negotiate a better deal.

3 Let the other guys build it

When there’s no avoiding spending money on software, it makes fiscal sense to stay away from software development. Let vendors deal with software development. Instead of customising software in-house or allocating staff to develop programs, get your vendors to do the development and customisation work on applications as often as possible. That way, the cost of development is not borne by you and there’s an immediate ROI.

4 Hunt down waste and kill it

Some of the hidden costs of IT are not exactly IT-related. But that doesn’t mean you can’t find savings there.

Every organisation has a surprising amount of waste, you have to look in all the nooks and crannies, and train your staff to do the same. If you create a culture where your employees watch for the little things that cost a lot, you can run a lean organisation without sacrificing the important things.

Most CIOs can say where they spend money in their department, but they don’t have a handle on their actual costs. They don’t know where the money really goes. So a good understanding of actual costs and their drivers is a very important factor and can save you a lot of money.

CIOs should do an in-depth analysis to find which major groups or activities cost the most, and then find areas to cut in those places. For example, if data storage is eating up a lot of funds, e-mail is often the culprit. By getting employees to clean out their e-mail boxes more often, CIOs could save 15 percent to 20 percent of their actual costs.

Budget constraints aside, CIOs know that it makes sense to spend money in IT and cut costs elsewhere in a business. Keeping all projects in line with business goals is essential for every CIO, but it’s particularly necessary when one’s IT budget is tightly constrained. Every project must be business-focused, with the strongest business case and a clear ROI so that every executive knows where each IT dollar is going, and knows it’s a business investment.

5 Bill the customers

Getting someone else to pay for the cost of your IT projects is a popular tactic used by low-margin CIOs as a way to extend the reach of a limited budget. All it takes is imagination and business sense.

6 Hang a shingle

Make the IT department operate like a paid consultant. This move can help CIOs get their arms around the total cost of IT, from maintenance and projects to how much it cost employees to park their cars. It also gives one a definitive way to ensure his department’s service levels are up to par

7 You didn’t invent a budget squeeze

Managing with tighter budget controls may be new to you, but CIOs in low-margin industries have been doing it for years. Budget constraints will force you to be creative and resourceful, but working on a shoestring shouldn’t paralyse you.

Just because we operate in a tight sector doesn’t mean we can’t do new or exciting things. You just have to watch the pennies.