The Kindest Cuts

The net net? Nada.

For years, economists have struggled with the "productivity paradox", the sense that the billions invested in technology have not yielded significant gains in worker productivity. Computers were supposed to replace people and shrink workforces into small, efficient pods of low-paid androids performing simple tasks dictated by computers. But study after study has shown that in the rare instances where computers have replaced people, the remaining humans need to be smarter and exceedingly well paid to make the complex new machines and work methods run correctly. The net net is nada - money spent on computers does not lead to lower labour costs and better productivity.

Spending on IT does have a positive influence on revenues, however, according to a groundbreaking study on technology spending in 1300 US corporations in 1998 by Sumit Sircar, professor and chairman of the Information Systems and Management Sciences Department in the College of Business Administration at the University of Texas at Arlington. Companies that spend more on technology tend to have higher revenues than those that don't. But the boxes and wires don't make nearly as much difference as the people, according to Sircar. The strongest correlation between technology spending and increases in revenue was the amount spent on the training of IS people - typically one of the smallest pieces of the IT budget.

But an IT boost to the top line doesn't always make its way to the bottom line. Companies that spend big bucks on technology are no more likely to be profitable than those that don't, according to the study. Good management, business strategy and products still matter more to a company's fortune than good IT.

The Quickest Cuts

Lease rather than buy hardware. Leasing keeps technology infrastructure out of the capital budget, which is always vulnerable during hard times.

Renegotiate contracts with vendors. Bundle services to get deep discounts.

Kill wireless. The technology is still changing too quickly, wireless Internet access is worthless, and most people don't need a mobile phone.

Reduce support times. Do your people really need 24/7 support?

Reduce contract help. Some consultants and part-timers may not be needed.

SOURCES: GARTNER, GIGA INFORMATION GROUP AND DARWIN REPORTING

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