Taking a long and hard look at your IT budget and how to manage it effectively will be front and center for 2010. These are some ideas that we believe can make a significant impact and demonstrate your commitment to aligning IT costs with the needs of the business.

i) Cease using IT recruiters

you don’t need them, there are enough IT candidates available for most staff positions and at 20%-30% of annual salary it just does not make sense in this market. Use your internal HR dept. or another resource to post and complete the initial screening of resumes or focus on an internal referral program. LinkedIn and Plaxo make excellent resources for posting positions and securing candidates through your personal network.  I recently spoke to the CIO of a national restaurant chain who hired a manager by posting an advertisement on his personal update.  He found many qualified candidates and hired someone very quickly.

ii) Eliminate or convert long-term contractor positions -

in all likelihood they are being paid double the market rate for a permanent hire.

iii) Cancel bad projects

that no longer make business sense. Work with the business to have a “no holds barred” discussion on what the priorities are for 2009 and whether the current project portfolio is in alignment. Sunk costs are just that….stop throwing good money after bad….

iv) Consolidate operations functions

and increase efficiency.  For example, production support, call centers, maintenance, end user support etc.

v) Consolidate data center facilities -

applications, servers and storage using VMWare or equivalent products to reduce the overall amount of infrastructure required.

vi) Review all telecom contracts

and look for billing errors and better deals in the market place.  There are companies that specialize in this, and they nearly always save you money. Vendors are highly motivated not to loose customers, so you have a very strong negotiating position.

vii) implement an IT Staff Management process

such as The Pennell Group’s IT Performance Management. Ensure you can account for and manage all your headcount costs on an hourly basis and that all IT managers are thinking like business managers.

viii) Ensure you are capturing all CAPEX man-hours and expenditures.

Anything you miss is most likely rolling up in a staffing expense line item somewhere.

ix) Implement stringent financial goals for all new and ongoing IT projects -

set hurdles for ROI, NPV, IRR or some combination. Form a project governance forum where all projects are reviewed regularly.

x) Extend the life of your legacy systems

which may be coming to the end of their original vendor maintenance window by entering into a third party maintenance contract.  For example, there are companies that will maintain EMC SAN hardware which is no longer supported by the OEM, they have spares and former EMC engineers on staff.

xi) Evaluate the use of RAID 5 & 10 in your Storage Area Networks (SAN).

You may have an over engineered solution that is driving you to purchase more drive capacity than you really need.  Evaluate the data being stored, the business need and what is reasonable.

xii) Implement thin clients for clerical users.

Sometimes Windows terminal devices can make more sense for certain classes of end users while being lower in cost to purchase and maintain.  For remote users, or home workers, consider allowing them to use their own personal computers in return for a monthly rebate.  Ensure that you have addressed information security concerns adequately.

xiii) Use open source software (Linux, Apache, Tomcat, JBoss etc.)

for commodity server functions such as web servers, file sharing, Java application servers, and development and test tools.

xiv) Promote flexible working practices

including flexible hours and work from home.  Then reevaluate your space requirements and renegotiate your lease accordingly.  ‘Hotelling’ and flexible space configurations will reduce the overall sq/ft requirements.

xv) Outsource non-strategic IT functions

to an offshore providers. For example,  maintenance of legacy back-office systems, software testing, data base maintenance and support and routine development projects.

xvi) Review your current IT service provider relationships.

If some of these are high-priced (Big 4 or comparable) and make use of out-of-state resources that travel weekly, look for a local provider that could provide the service with local staff.  Skilled resourced are much more available now, so you have more options.

xvii) Look for ways to offer up more internship and hire more entry level people into junior positions.

Many companies just find it easier to hire mid-level and senior people because it feels easier, but in reality a junior hire may work out much better and reduce overall costs.

xviii) Look for ways to use video conferencing and instant messaging,  Live meeting

and Webex type technologies to avoid unnecessary business trips.  Provide incentives for staff to stay with friends and relatives on business trips to reduce hotel costs.

xix) For training, focus on computer based training and self directed training efforts.

Highly motivated employees will do well with this option as they are much more invested in the process and the outcome.  When employees go to offsite training ensure that they provide a ‘lunch and learn’ for other team members when they return.  This will double their learning and share that information with many others.

xx) Hire The Pennell Group to help evaluate these and many other ideas.

Here’s my take on the top 10 reasons IT product projects fail, based on my 20 years experience completing product projects across a broad range of technologies and industries.

1) Incomplete understanding of requirements and goals

Failing to plan is planning to fail. No matter how urgent the business need it’s crucial that a reasonable amount of time is dedicated to planning out the project and that starts with clearly understanding and documenting the requirements, or being prepared to spend quality time with your service provider to educate them to the extent that they can do this for you. If finding the time is a problem, take the key team members offsite to a separate location with the mission to spend as many days as it takes to get this accomplished and help them clear their desks of other assignments while they do this.

2) Lack of executive support and alignment with business stakeholders

It’s crucial there is an executive sponsor who is passionate and motivated to see the project through to a successful conclusion and has the authority to spend the company’s money and resources and remove ‘road blocks’. Everyone on the team needs to know who this is and the team need to plan to spend time at least weekly with this person to keep an open and candid dialogue of results and issues etc.

3) Failing to choosing the right technology partner

Choose a partner you trust if you already have one great! A good test of that partner’s commitment to the relationship is the amount of face time you have with their executive management and the degree of personal accountability they have. If you are going to be spending large sums of money with a company, you need to know that their executive management team feels the accountability and pressure to perform and that they will be there when you need them when problems arise. If you have only ever met with account managers and relationship managers then that’s a sure sign that you are not a priority and you do not have the appropriate level of attention and focus.

Watch out for overcommitment to win the business.  Many companies will do this knowing that you are going to be locked in even when you find out that they cannot complete the project within the agreed terms.  You should ask for a number of comprehensive proposals with references and look for how the vendor has demonstrated not only their basic understanding, but ways in which they can add value to your project and organization.  For example, will you be able to hire any key consultants if they become powerful additions to your business?  What terms would apply?

4) Lack of clear accountability and lines of authority

Organizations will often create structures and processes that obscure individual transparency and accountability and if this is the case, then it must be resolved before the project starts. If functional management and project management responsibilities have to be split, then roles need to be very clearly defined and agreed and how decisions will be made. Plan on defining the approach for resolving issues with the sponsor related to responsibilities and accountability up front.

5) Lack of project transparency and reporting

There must be a clear and simple way to report progress, issues and challenges as the project moves through the phases of its life. There needs to be the right balance between ’smily face’ summaries and 500 line Gantt Charts which no one can understand or read. The stakeholders and team should be able to see and understand a single high-level plan that can be clearly read on one sheet of paper. The project manager can maintain whatever other detailed plans are needed.

Red Flag. If all the stakeholders are hearing is ‘rosy’ pictures of progress week in and week out, then there are most likely problems which are not being reported. As a stakeholder, you want and need to hear enough about the project’s issues and challenges to have confidence in the communication channels that are in place.

6) Picking the wrong technology

For new products and services, it’s crucial to pick the right technologies and understand the trade-offs which are being made. You may have this system for 10+ years, so it’s an important decision. On the one hand, you want to be a current as possible, on the other you don’t want to risk technologies and vendors who are as yet unproven. Try to pick from the mature established systems available and avoid completely new technologies and products. For example, for web applications you really have three choices: Microsoft’s .Net, Sun/Oracle’s Java or Open Source. That’s it unless you have some very special and unique requirements.

7) Failing to focus on early and often delivery

Create plans and goals that deliver something as early as possible even if it has no actual customer use. Insist the team provide something visible at each milestone that the stakeholders and business can review and react to and plan to build on it in small phases from 2 weeks to 4 week cycles. Ensure the project team understands that you are OK with seeing ‘work in progress’, and when you see it, don’t ‘nit pick’ it to death. Engineering teams tend to be detail oriented and err to perfectionism, so plan to encourage early demonstrations and help them gather constructive feedback in a positive way. Thank them for what they have accomplished and be grateful you don’t have to understand all the details.

8 Lack of focus on the true customer / end user

Most products and services are not used by power-users or experts and yet so many products are designed in a way that makes usage frustrating and annoying for customers. Do you know what all the buttons and dials on your digital camcorder do? The reality is that most customers want to point their camcorders at their subject, record and playback. From the camcorder user interface you would think they are master’s students in digital imaging who spend all day adjusting settings and features to make the next blockbuster. This is one reason Apple was able to take over the mp3 player market. Their iPods are easy to use and fun, and don’t make their customers feel stupid.

So when you are reviewing designs and testing, you need to involve people who are representative of your customer base and plan to systematically collect and analyze their feedback so changes can be made.

9) Failing to understand that there will be 1.0, 2.0 and plan to learn and adapt from successes and failures

Realize that you are not likely to nail it in one shot. The goal is to be successful enough to get another shot at a 2.0 product and so on. So treat each major project as a learning experience and plan to experiment in the areas where you need to get quick feedback. Usually fast trumps exactly correct when making these decisions.

10) Being stuck within existing process, technology and people constraints

Be ready to try new things, whether that’s technology, organizational structure, processes or working practices. As you encounter problems, look for creative solutions which can be quickly implemented to inject energy and drive into the team and demonstrate the level of empowerment and commitment the sponsor and stakeholders have.