Slashing IT maintenance budgets: Sign of the times

In a down economy, some shops are cutting where it really counts -- maintenance -- and are hoping for the best

No matter what the pundits say about an economic turnaround, times are still tough. And after technology projects are delayed or stopped, layoffs are made and next year's budget is slashed, there's one more realm where IT is feeling the pinch: maintenance cuts.

To help save money, IT groups are being asked to cut back -- in some cases, dramatically -- on their maintenance contracts with vendors. So instead of paying a premium for vendors to, say, fix any problems in key software and hardware within four hours, a 24-hour turnaround might have to suffice instead. Sometimes things stay broken until IT staffers can figure out the fixes themselves. And in the meantime, ITers involved say, they just hope that their business users will not notice any ill effects.

Jim Milde, executive vice president of global services for Boston-based IT services company Keane Inc., estimated that of his largest customers -- in pharmaceuticals, insurance, finance, government and transportation -- around 10% are cutting maintenance costs in various ways.

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This trend is being seen in pockets all over the industry, IT staffers and industry analysts agree. But given the sensitivity of the issue, and often the politics involved, most ITers would speak about it only on the condition that they not be identified.

Why cut?

Lauren Whitehouse of Enterprise Strategy Group in Milford, Mass., said companies "have to do what they have to do" to get by today. By cutting or renegotiating maintenance pacts, companies trim costs so that they can perhaps avoid or reduce layoffs or still have money to spend on innovative new projects that will help grow the business when the economy does rebound, Whitehouse said.

"Hypothetically, 70% of your budget is for keeping the lights on and 30% is for moving the business forward" strategically in the future, she said. "So you look at the 70% to see what you can squeeze out there so you can keep the strategic stuff going."

For many clients, service-level cuts are "the last straw," Keane's Milde said. "We've seen clients go at rate reductions or cutting baseline support, but it's always with the caveat that they want to keep the trains running."

One IT staffer, a software engineer for a $1.5 billion Midwestern sporting goods manufacturer, said maintenance cuts came to his company after lots of other paring was done, including layoffs of about 20% of the IT staff.

What's being cut

In the past, the sporting-goods IT staffer said, a typical IT maintenance contract purchased by his company specified that if a piece of equipment failed, the vendor would have someone on site within four hours to replace or repair it, he said. "Now, our philosophy is that if it breaks, we'll just go to the store" and buy a replacement.

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