Managing Budgets

Computerworld - Gone are the days of the slam-dunk, no-brainer IT decision. Every choice a CIO makes in today's painfully cost-constrained business environment is high risk.

Delaying or scaling back a pricey CRM project to stay within the corporate budget can mean losing customers in the long run. Laying off IT employees to slash labor costs can shatter morale and create skills gaps later on.

"The risk in everything is finding the right balance. But one of the problems is that everything changes," says Samuel F. Averitt, vice provost for IT at North Carolina State University in Raleigh. "Decisions we make today are not necessarily going to be good ones for tomorrow."

As IT executives shift more and more into the role of risk manager, their primary job is to diligently and continually identify, weigh and – above all else – minimize the liabilities associated with all IT projects.

The key, say several of this year's Premier 100 IT Leaders, is to pay keen attention to timing, focusing primarily on the long term. Immediate savings from budget or staff cuts that do nothing to move the business closer to its long-term goals add up to little more than eye candy on the balance sheet.

Harry E. Roberts, senior vice president and CIO at Boscov's Department Stores LLC in Reading, Pa., was charged with cutting his budget significantly in 2003. But after thoroughly reviewing the $1.1 billion retailer's IT project roster, Roberts concluded that if the company wanted to meet its strategic business objectives, "the major things we needed to do, we still needed to do."

That's when Roberts and his team turned their full attention to Boscov's telecommunications contracts. Roberts dumped the company's two big-name vendors – Verizon Communications and MCI – and signed an enterprise deal with a little-known regional carrier, D&E Telephone Co. in Ephrata, Pa. The risk: "We traded some of that security that comes with a national vendor," Roberts says. But in doing so, Boscov's also saved $1 million and cut its long-term communication costs.

In yet another gutsy move, Roberts shifted certain retailing applications from a Windows NT Server environment to a Linux-based IBM mainframe. In the process, he virtually eliminated client/server computing costs that had been spiraling out of control.

"We made the decision that we could no longer expand the server farm that was growing at a rapid rate. We kept having to hire [a full-time IT employee] for every 10 to 12 servers we brought online," Roberts recalls. "The risk was in making the transition from one vendor's software to another without missing a lot of time for training."