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When Downsizing Goes Too Far

o CIO staff
21.07.2010 kl 20:57 | CIO (US)

An online retail business built its most critical systems in-house when resources were plentiful. But today the business has downsized considerably. Can IT still regain lost ground?

 

An online retail business built its most critical systems in-house when resources were plentiful. But today the business has downsized considerably, with the IT budget cut to support only critical systems and only one senior executive and a developer left to manage numerous disjointed systems and servers. Customer service is now declining and IT can't add new functions. When the CEO says, "Fix this ASAP!" what should this lone CIO do?

Paul Bergamo There's nothing like a dire situation to test your managerial mettle. Depending on the site specifics, there are several options here, including using cloud computing for applications and infrastructure, outsourcing, virtualization and application shutdowns.

All these scenarios present tough choices. The CIO and his business colleagues probably cut staff too soon. Some careful planning and mapping of the IT portfolio to prioritize certain business capabilities would have provided a more effective way to downsize in line with affordability, growth strategies and priorities.

I've seen big and small companies make this same mistake of slashing headcount first and doing the business impact analysis second. Then they realize they've put critical functions at risk, damaged customer service and limited their ability to regain lost ground. Unless you want to shutter the business, you must develop and implement a fast-tracked, business-aligned rightsizing of the department.

To do this, the CIO must do a detailed assessment, starting with creating an inventory and mapping current and desired business capabilities against the technical stack. Then company executives need to prioritize these capabilities to identify options, factoring in capability priorities, nondiscretionary spending and current affordability levels.

Once the tough choices are made, the CIO and his business peers can stabilize and position the environment to add targeted functionality to help the business grow.

Paul Bergamo is a general partner at NewVantage Partners. Reach him at pbergamo@newvantage.com.

Jesus Arriaga In today's market, this kind of problem has become commonplace for many IT executives, creating a nearly impossible task. Yet we IT people are problem-solvers, right?

One place to start is by making sure the expectations of the business are realigned to the capacities IT can currently deliver. This organization was accustomed to building out any type of functionality it needed when resources came easily. With that capability now gone, business executives obviously must adjust their expectations and rethink how the company will run to survive.

The IT executive needs to identify and communicate which areas can no longer be supported with current staffing and resources. Once that's done, the CIO can start lining up options. It's important during this process to gather enough concrete details to satisfy business colleagues. That usually boils down to the hard costs associated with maintaining an environment that exceeds support capacity. But there is also a cost to the business in lost potential revenue.

Once the plan has been used to identify the critical processes in each business area, the CIO has to move quickly to evaluate alternatives. Cases like this are prime candidates for outsourced models such as software-as-a-service or cloud-based solutions, which can offer low-cost, stable replacements for eliminated internal resources.

Most essential for the CIO here will be managing the change in expectations, so be ready for some political struggles.

Jesus Arriaga is president of CIO Strategic Solutions. Reach him at Jesus.Arriaga@CIOStrategicSolutions.com.

Read more about retail in CIO's Retail Drilldown.

Keywords: Industry Verticals  
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