Daily Archives: October 12, 2008

IT Enables Big Savings

A recent article on managing IT in a downturn in the McKinsey Quarterly had a couple of great points.

1. In some instances, IT investments deliver more value to a company’s top and bottom lines — by creating new efficiencies and increasing revenues — than any savings gained from traditional IT cost cutting.

2. The impact on run-rate EBIT from optimizing supply-chain processes with streamlined systems is 3 to 4 % … which is 6 to 8 times the impact on run-rate EBIT from transactional IT cost reduction which tops out at 0.5%.

In other words, you get more bang for your buck from process improvements than from reactionary across the board budget cutting. The reality is, as the article points out, simplistic cuts, applied across the board, may endanger critical business priorities from sales support to customer service and could cripple your IT and supply chain operations.

Where do you start? With your data of course! As the article notes, few companies have successfully capitalized on the explosion of data in recent years. Often this information, residing in separate IT systems or spread across different business units, has never been mined for insights that could add value. So you start with a spend analysis and opportunity assessment. Then you tackle the opportunities with the largest savings potential first.

Then what do you do? You implement the right systems to streamline your operations. This will allow you to get more of your spend under management and tackle more of the savings opportunities that you identify.

Then you see real savings. And while your understaffed competitors are running around like chickens with their head cut off, because they foolishly cut across the board and lost key people and resources, you’re growing your market share.