Cutting IT Costs During A Recession

I ran across this very interesting Gartner Research publication and thought I should share.

Today’s economy calls for changes in managing IT spending and the report walks through new approaches to managing procurement, contract negotiation, operation cost management, equipment retirement and more.

I believe that one of the biggest mistakes companies make is not being proactive in planning for a “recession” budget and once they are hit by the recession, the only way to balance the books as it were is to make the hasty decision to cut personnel in an effort to appease the market.

In many cases cutting costs revitalizes profits but these short-term cuts could have dire long-term consequences. Too often the decision for layoffs is a knee jerk reaction to an overwhelming financial situation that will have a big psychological impact on the company.

The 6-Step Process

  1. Don’t Wait for the Cost-Cutting Mandate from Management.
  2. Choose the Best and Brightest IT People for the Team.
  3. Don’t Allow Finger-Pointing or Second-Guessing.
  4. Enlist an Internal Auditor as Scorekeeper.
  5. Report Results on a Weekly Basis.
  6. Identify a Liaison From the Legal Department.

Recommend Reading:

  • Smart IT Actions for Tough Times
  • Cutting IT Budgets: Tactics a Survival Guide
  • Research Collection: Cost Containment
  • Spend Less, Get More: 25 IT Cost Containment Techniques

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The Devil’s Excrement and OPEC

On October 16th, Oil prices plummeted below $70 for the first time in 16 months, loosing half its value since hitting a record high of $147.27, prompting the oil cartel OPEC to call an emergency meeting.

OPEC cut production by 1.5 million barrels a day starting November after their emergency meeting on October 24th one month ahead of their scheduled meeting.

Although their next meeting was not scheduled until December 17th, the OPEC cartel will meet again this coming November 29th in Cairo, most likely to make another cut in production. In this global financial turmoil, they run the risk of taking things too far as demands for energy increase during the winter months.

The drop in prices has already created problems for oil producers, who have become accustomed to high prices. Iran needs oil prices at $95 a barrel to balance the budget, Russia needs $70, Venezuela needs $60 and Saudi Arabia needs $55 a barrel, according to Deutsche Bank estimates. Cartel representatives have hinted at the idea of fixing a price high and low, which they call “ideal” ranging between $70 and $90 a barrel.

Juan Pablo Perez Alfonzo was a Venezuelan minister of energy that popularized the phrase “oil: the devil’s excrement” and the minister said that the oil corrupts the power.

Gasoline: The fall in world oil prices since July has pushed gasoline in the United States, the world’s largest oil consumer, from a high of $4.114 a gallon on average to $1.91 a gallon Monday, according to motorist group AAA.

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Source:

http://money.cnn.com/2008/10/24/markets/oil/

http://www.iht.com/articles/2008/10/16/business/oil.php

http://seattletimes.nwsource.com/html/localnews/2008429585_webgasprices24m.html

Is This Economic Slump Different?

Dimensional Vice President Weston Wellington offers perspective on the unpredictability of market movements, how the current market downturn compares to past bear markets, and the resilience markets have historically shown.

Its definetely been a wild couple of weeks for the world economy, but has it really been that bad?

How does this economic slump compare to other recession/depressions in history?

Yesterday CNN reported, that it was the Biggest one-day runup ever for the Dow Jones; which gives me food for thought for another post.

There is more here than meets the eye. It has become apparent that there are powerful forces here at play.

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BailOut Solution – I’m in for at least $425k

I really like Mark Cuban’s BailOut plan, making use of the free market to get us out of this mess and keeping it transparent by creating an exchange-traded fund (ETF).

I recently got an e-mail with another option for an economic recovery plan detailed below…. my kind of plan!!!

Now here's an idea!!!!

Subject: The JK Economic Recovery Plan

I'm against the $85,000,000,000.00 bailout of AIG. 

Instead, I'm in favor of giving $85,000,000,000 to in a We Deserve It
Dividend. 

To make the math simple, let's assume there are 200,000,000 bonafide
Citizens 18+. 

Our population is about 301,000,000 ± counting every man, woman and
child. So 200,000,000 might be a fair stab at adults 18 and up.. 

So divide 200 million adults 18+  into $85 billon that equals
$425,000.00. 

My plan is to give $425,000 to every person 18+ as a We Deserve It
Dividend. 

Of course, it would NOT be tax free.
So let's assume a tax rate of 30%. 

Every individual 18+ has to pay $127,500.00 in taxes.
That sends $25,500,000,000 right back to Uncle Sam. 

But it means that every adult 18+ has $297,500.00 in their pocket.
A husband and wife has $595,000.00. 

What would you do with $297,500.00 to $595,000.00 in your family?
Pay off your mortgage - housing crisis solved.
Repay college loans - what a great boost to new grads Put away money for
college - it'll be there Save in a bank - create money to loan to
entrepreneurs.
Buy a new car - create jobs
Invest in the market - capital drives growth Pay for your parent's
medical insurance - health care improves Enable Deadbeat Dads to come
clean - or else 

Remember this is for every adult U S Citizen 18+  including the folks
who lost their jobs at Lehman Brothers and every other company that is
cutting back. And of course, for those serving in our Armed Forces. 

If we're going to re-distribute wealth let's really do it...instead of
trickling out a puny $1000.00 ( "vote buy" ) economic incentive that is
being proposed by one of our candidates for President. 

If we're going to do an $85 billion bailout, let's bail out every adult
U S Citizen 18+! 

As for AIG - liquidate it.
Sell off its parts.
Let American General go back to being American General.
Sell off the real estate.
Let the private sector bargain hunters cut it up and clean it up. 

Here's my rationale. We deserve it and AIG doesn't. 

Sure it's a crazy idea that can "never work." 

But can you imagine the Coast-To-Coast Block Party! 

How do you spell Economic Boom? 

I trust my fellow adult Americans to know how to use the $85 Billion We
Deserve It Dividend more than I do the geniuses at AIG or in . 

And remember, The Birk plan only really costs $59.5 Billion because
$25.5 Billion is returned instantly in taxes to Uncle Sam.

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