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IT Changes to Reduce Costs

This year IT Leaders are under pressure to reduce costs. Businesses need to improve cash while increasing operational efficiencies. These demands will cause fast changes.

The shift to virtualization this year has been very swift. IT Managers are now moving from 1.0 issues (What Servers to Virtualize) to 2.0 issues (How do I mange these virtualized servers?).

There is also a shift to cloud computing and hosted applications. This is a very disruptive shift and happening a little slower. The value proposition is very compelling in these times of cost reduction. Businesses can completely offload the infrastructure capital purchase and the management. This is very good for the business cash position.

Gartner points out that outsourcing is anti-cyclical since it is done in growth periods and sometimes more in down turns. They also present moderate results:
“Even during stable economic times, outsourcing has some specific drawbacks. It often delivers moderate (for example, 10% to 20%) cost reduction in exchange for moderate levels of satisfaction (typically 5 on a scale of 1 to 7, in which 7 represents the highest level of satisfaction), low levels of flexibility (4.8 — the lowest satisfaction score on Gartner outsourcing surveys), while causing high levels of lengthy renegotiation (more than 60% of deals are partially renegotiated in the course of their term).”
– Predict 2009: Recession Accelerated Shifts in IT Services, Gartner Report

Clearly there will be a shift to cloud computing but there will be a hybrid model for many years for most businesses. IT department will need to develop new process and methods to manage the hosted applications. Since hosted applications are fast to turn on, IT Departments will also need to manage more applications and have a strategy to stay compliant.