The global IT market research firm Gartner has produced new research showing that IT leaders tasked with reducing costs under harsh economic conditions will not achieve their financial objectives unless they cut headcounts.
The study found that server consolidation and cuts to software licences are insufficient to hit targets: cost reductions delivered by such methods have come in well below expectations. Clients surveyed in the study conceded that a raft of measures, including virtualisation, hardware rationalisation, better management of software inventories, data centre consolidation and selective headcount cuts, frequently failed to deliver the required savings.
Commenting on the new Use an Innovative Approach to Manage I&O Budgets Beyond 2013 report, Gartner’s VP of research, Rakesh Kumar, drew the following blunt conclusion: “Most infrastructure and operational reduction programmes that do not include layoffs do not achieve the targeted financial goals.”
The single biggest component of IT budgets, he continued, was the cost of personnel. He added: “All cost reduction initiatives should start with the question of whether or not headcount reduction is desirable.”
The proportion of the total IT budget allocated to IT operations and infrastructure will continue to fall over at least the next five years, Mr Kumar predicts, meaning that both will need to deliver more for less. He recommended that CIOs consult with colleagues from their firms’ finance teams to advise on cost-reduction strategies, as they will be familiar with best financial tools to monitor budget cuts.
One implication of this forecast – gloomy as it may be for permanent role holders – is that IT pros contracting as Umbrella Company Employees may see increased demand as firms struggle to ensure vital business projects are delivered.