Frustrated because your business is down and your IT department can’t find ways to respond? If you’ve structured your financial reporting on IT as I suggested in my prior blog, you should be able to quickly look at the following actions and evaluate their desirability and impact:

1. Stop projects – Make each project rejustify itself with a new hurdle rate.

2. Lengthen refresh cycles – There is really no good reason to upgrade PCs these days, and many vendors’ software packs contain fixes for functions you don’t use. The next time IT tells you they want upgrade because Microsoft has put out a new version, ask them, “So what?”

3. Renegotiate unit costs – Particularly in hardware, which is in free fall right now, but also for the other categories. Be aware of the end of quarter, when the vendor has a lot of pressure to close deals, and consolidate vendors when possible.

4. Tighten consumption – One of the best tools for behavior modification is a system for internal transfer pricing, i.e., every business sees and pays for the services it incurs. Try to minimize holding cost at the center.

5. Freeze new hires – If you do the above, this should be much easier to achieve.

6. In-shore – Move work within the company where it is cheapest, e.g., let the server techs in India manage New York’s e-mail servers.

7. Lay off staff – This is last because it is the worst thing to do. IT is a knowledge business and it will cost you more to rehire and train them later, but it does result in some immediate cost savings. Also, you will tighten supply because there will be fewer people to respond to requests.

8. Outsource – In the long term, you will never save money from outsourcing a function you are already doing, if you are prepared to step up and manage it. That said, if you have assets such as a data center and mainframes, you can do a sale/leaseback which will bring in up-front cash and variabilize the (higher) operating cost going forward. ###