Andrea Di MaioLike many people I have been listening to the debate between Obama and McCain. The third question that the moderator asked was “Which part of your programs will you have to give up in order to pay for the financial rescue plan (i.e. the 700 billion dollar bailout)?”. Both candidates stressed what they will certainly keep investing on, according to their political priorities, but were conspicuous in their silence about what it is that they would cut. When challenged again by the moderator, McCain mentioned the possibility of a spending freeze while Obama said that selective cuts would be performed on ineffective programs: yet, both remained quite generic.
Reality is that the magnitude of the financial crisis and of the resources required to face it, not just in the US but worldwide, will have to tax very heavily government programs in a variety of areas. Over the last year or so we have already discussed with some of our clients about budget cuts and, while everybody would agree that the wise use of IT can allow major savings in business processes and entire government programs, in most cases the hatchet has already fallen on IT budgets.
Is there any evidence that it will be different this time? Unfortunately IT has not achieved the credibility required to be seen as part of the solution, but is still perceived by many as part of the problem. Further, government priorities are shifting very rapidly toward providing financial support to institutions under stress as well as to businesses and citizens. There is no time for long term planning and revised IT strategies, but only for low-hanging fruits.
One plausible scenario is that new IT-intensive programs will be cancelled and delayed and government transformation initiatives will slow down considerably. Also cross-boundary initiatives (besides those necessary to implement and monitor financial rescue plan) will freeze, as jurisdictions refocus their priorities on welfare and economic development.
Another scenario is that this very situation creates an impetus for further IT investments in the areas of performance management and supervision, as well infrastructure rebuilding to create the conditions for re-igniting growth. However there will be short and medium term consequences on a number of programs defined and launched over the last few years.
Whichever the future, it is going to be a bumpy ride for government IT program managers and CIOs in the months (and years) to come.
Category: Uncategorized Tags: cost cutting, e-government
4 responses so far ↓
1 Max Claps September 29, 2008 at 3:42 am
Last week I had conversations about IT budgets with a number of European government CIOs and their expectations varied greatly by country; nonetheless there was an interesting comment from one of them about the “color of money”. What that CIO meant by color of money was the difference between budgets that include IT investments as part of transformational programs and budgets that cover exclusively IT operations.
That CIO and his peers agreed that often times IT infrastructure operational costs suffer most of the squeeze, because that is where the line of business executives do not recognize the value for money, whilst programs suffer less. So it might well be that CIOs will struggle to keep the lights on, whilst they will still be able to fund IT transformation in selected programs, such as welfare, as you mention in your post.
2 Philip Allega September 29, 2008 at 7:11 am
I just left a meeting with a large company in Germany who is seeking to cut 90 million dollars from their IT budget in the next fiscal year. An unfortunate lack of skills in EA, portfolio management and IT governance has found them at a loss over what to do next, after the low hanging fruit has all been taken. Such skills cannot be created on the spot – maturity takes time.
3 Philip Allega September 29, 2008 at 7:18 am
I just left a meeting with a large company in Germany who is seeking to cut 90 million dollars from their IT budget in the next fiscal year. An unfortunate lack of skills in EA, portfolio management and IT governance has found them at a loss over what to do next, after the low hanging fruit has all been taken. Such skills cannot be created on the spot – maturity takes time.
To liberally borrow from MARSOC principles:
*Quality is better than quantity.
*Competent Enterprise Architecture cannot be created after emergencies occur.
*Humans are more important than hardware.
*Enterprise architects cannot be mass produced.
4 Bruce Robertson September 29, 2008 at 3:37 pm
Also consider this specific strategy: if business eliminates capability, IT must eliminate related investments. Example: see this Gartner research: “Don’t Overlook Opportunities to Save Costs on ITAM” (27 March 2008, ID:G00155592). Quotes:
“Are telecommunications services in line with current requirements?”
Recent consolidations and facility closings can significantly reduce an enterprise’s telecommunications requirements. A good example of the lack of follow-through occurs when the telephone systems are removed from a facility, but the telephone service connections remain in place. Ensuring that telecommunications contracts are modified to reflect service reductions is overlooked.
Cost savings associated with tighter management of telco services represent a wide range of opportunities, but if your organization has been lax in managing this cost area, look for a potential savings of at least 5% on total telecommunications costs following an initial audit.
One-Time Cost to Implement: $20,000 initially or, if the audit is outsourced, 25% of the first-year savings
Net Savings in 2008: Initial reduction of 5% to 10% of total telecom costs
Annualized Net Savings in Future Years: Annual savings of 5% of total telecom expenditures