As the global economic slowdown intensifies, companies looking to cut their IT budgets to reduce spending and improve the bottom line may do more harm than good to the business.
That's according to Grant Bodley, GM of Dimension Data Middle East & Africa who says executives should rather use this economic downturn to re-prioritise their IT budget so as to enhance critical business priorities from sales support to customer service.
"IT investments often deliver more value to a company's top and bottom lines – by creating efficiencies and increasing revenues – than any savings gained from traditional IT cost cutting."
According to Bodley, if companies are looking for ways to improve efficiencies and find cost savings, outsourcing of selective IT functions might be a more effective approach. The sourcing of IT services from specialist external service providers allows the business to acquire an industrialised approach to operations where strict conformance to process and procedure ensures maximum availability of service to the business.
Benchmarking ensures that the services are obtained at competitive rates and a variety of commercial arrangements allow for the most suitable engagement to be transacted.
Through this approach, retained IT staff can focus their time and energy on IT innovation and continual alignment to the business strategy.
According to a recent report released by the SA-based BMI-TechKnowledge Group, outsourcing is the fastest growing component on the South African IT market. Bodley says outsourcing is also predicted to continue to account for the largest portion of the total IT services market, reflecting the fastest growth rate over the next five years with a compound annual growth rate of 7,7%.
Outsourcing now accounts for some 44% of the total IT services market in South Africa, says Bodley
He adds that another area to potentially counter the effects of an economic downturn might be the adoption of newer technologies, that have been proven to reduce IT operating costs and allow for the restructuring of the budget with an increased emphasis on operating rather than capital expenditure.
"Belt tightening will actually drive faster migration to innovative new technology solutions and related acquisition models, such as hosted virtualization services, hardware as a service, software as a service, IP-based telecommunications, and enterprise Web 2.0 applications."
In addition, he says one of the outcomes of the global banking crisis is possible new regulations to govern and regulate the financial services industry.
"As a result we might find there will be a greater need by companies to prioritise funding of software and services in order to enforce compliance. Effective IT governance is an increasingly important element of an organisation's compliance and corporate governance programme, because many regulations apply to an organisation's information, which is housed within its IT systems."
Bodley says, given these factors, it is critical that" companies give careful consideration before they start slashing their IT budgets in order to try and weather the global economic storm.
"In a volatile economic environment, IT can provide organisations with a perfect opportunity to rather their IT investments. In fact targeted investments can generate efficiencies and revenue growth that surpass any savings that might come from reducing a company's IT budget," Bodley adds.