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.

If you believe what Delloite is saying in their ‘The 2009 Shift Index’ then harnessing the flow of knowledge and information is the primary determinant of achieving and sustaining long-term success.  A large factor in that equation is the ability to attract and retain the smartest and most passionate employees (though employee is not really a good word here, team member or owner are better).

These kinds of people want to participate in the success of an organization at a fundamental and visceral level. They need to be empowered to take and manage risks which in most organizations are the sole purview of senior management. Therefore, these people avoid large traditional organizations because the entrenched culture, management style and red-tape are too oppressive and controlling.

For many companies’ seeking new markets and opportunities, these employees and traits are hard to find and retain. Have you ever asked yourself what a new employee’s reaction is to these common experiences?

· Getting their PC installed and configured correctly (4 weeks after arrival)

· Receiving policies and procedures manuals (fragrance policies, dealing with intruders…)

· New hire orientation (HR monologues on policies and procedures, company history…)

· The look of a drab grey high-rise 10×8 cube (many prison cells are more inspiring)

· The 8-6pm M-F corporate routine (innovation and passion is not scheduled into a daily routine)

· The sense of disappearing into a giant corporate machine (where’s leadership?)

Much or today’s management culture and best practices had its origins in the industrial revolution of the 1900s, based on command and control management, standardized production and reactive management of localized risks. Today, many working environments and corresponding lifestyles are sadly reminiscent of George Orwell’s Nineteen Eighty Four (1949) and Aldous Huxley’s Brave New World (1932). So it’s no wonder that so many Generation ‘x’ and Generation ‘y’ employees struggle to integrate effectively and deliver the promise of their potential in organizations lead by Baby Boomers in industrial era companies.

In these industrial era organizations, when it comes to policies and procedures, you start by creating and implementing the standard business practices of the day. In many cases at the behest of trained HR professionals and corporate attorney’s who have no desire to be held responsible for a crisis at some point in the future. Then over many years you add to the list of policies and procedures as new issues, regulations and events shape the organization.

After a few years, you end up where most large companies are today - where the accumulation of years of good intentions and best practices have dulled the passion and vibrancy of the employees who are supposed to be creating the future. The death by a thousand cuts.

If you want to start hiring and retaining the people who will drive your new strategies and innovations, you should start with a hard-hitting plan to throw out all but the most essential policies and procedures and put in place an oversight group charged with balancing not just the daily operational risk, but also the long-term cost of adding to the pile of dull policy documents that adorn most companies.

Expect to be the recipient of more HR issues and law suits and factor in not just the costs and risks involved in defending these charges, but also the long-term effects of mitigating each risk and crisis with a new set of policies and procedures. For the future, when it comes to corporate policies and procedures less really is more.

If you want to know what it’s like for a Generation ‘x’ or Generation ‘y’ new hire, try getting some volunteers from a local university or college and have them go through the on-boarding process as if they were joining the company and get their feedback along the way.

If you want to achieve Strategic Customer Alignment (SCA) while having passionate and engaged employees, then demand your best and brightest IT staff spend time with real customers on a regular basis and then hold them accountable for using that experience to increase customer satisfaction and delight them in the work they do. Too often, the IT organization depends on sales and marketing to pass along the ‘dumbed down’ and often confused wants and desires of customers and the result is frequently lackluster products and services that miss the point, and the potential for non-commodity profits.

Lastly, find ways of treating employees like responsible adult professionals instead of children in a patriarchal group, for example by giving them ‘standard working hours’ and rules and policies that are largely common sense. After all, if you can’t trust an employee to behave reasonably most of the time, and work well with peers then they should not be working for you in the first place. Put another way; don’t expect your hiring and retention mistakes to be mitigated by policies and procedures after the fact. Hire only quality talented employees (and give them a road to an ownership stake) and most other things will take care of themselves. Conversely, expect that some employees will not flourish in the new environment and they will need to leave the organization either of their own volition or otherwise. Accountability is crucial in this environment, especially with the new empowerment and expected delegation of risk-taking.

We believe commodity success belongs to commodity companies, and that the promise of the future belongs to companies who can hire, retain and motivate the most talented and passionate work force. So go ahead and start building the future now…