Companies urged to trim IT management

Link: IBM closes PwC Consulting deal

The consultant, which has just sealed its $3.5bn acquisition by services giant IBM Global Services, claims this is just one way companies can cut cost out of the business and cope with increased competition and the economic downturn.

Simon Street, partner in the worldwide strategey practice at PwC Consulting, said that figure applies for management across the business and can be translated to the IT function.

“Clearly we are in the difficult situation of looking at the sizing of the organisation, and most UK-based organisations are over-managed by around 33 per cent,” he said.

‘Typically in the IT function that same percentage would apply. That amount of management is strangling the business.’

He said options range from just getting rid of the staff to handing over control of some or all of the IT side to an external supplier. But he admitted companies are increasingly reluctant to enter into big outsourcing deals.

‘Most outsourcing agreements promise a 20% reduction in cost for the first two years, but what looked good on paper doesn’t always look good after two years. Generally outsourcing has not been the silver bullet but it does take things off the balance sheet.”

Other options include shared IT services, which the consultant estimates can save businesses 30% to 40%. These are typically things like HR, payroll and procurement systems that can be hosted by supplier and used by many companies to achieve economies of scale.

David Roberts, chief executive of blue-chip user body The Infrastructure Forum, expressed surprise at the figures but admitted IT bosses are under ever-increasing pressure to cut costs.

‘It sounds like a gross generalisation,’ he said. But he said companies are still looking to trim out costs: ‘If you are running a fairly large IT function supporting a substantial corporate business, the business is still asking for a significant reduction in IT without degradation in deliverables.’

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