The economy may be slowly improving but budget cuts for many IT departments are here to stay for a little-while longer at least.

PHI Inc CIO James Quinn, like other IT executives, will be heading into 2011 with a list of worthy projects that the global helicopter transportation company will nonetheless be deferring - at least for the time being. But there are certain kinds of projects you won't find on that hold list.

Key among them are projects that are "customer-facing or anything that saves dollars," says Quinn.

"Anything that involves process improvements and anything that can show a fairly fast ROI is also getting pushed to the front."

On the expense side, PHI will continue to reduce costs by outsourcing "keep the lights on" operations, even farming out the maintenance of production databases. The company is also renegotiating its agreements with just about all of its IT and services providers, including those whose contracts haven't yet expired.

"We're being very aggressive, going back to vendors to work multiyear deals in exchange for cost reductions today," Quinn explains. "We're seeing our customers do that to us, and we're doing the same thing with our vendors."

IT shops in all industries are approaching 2011 the same way Quinn is: They plan to vigilantly manage flat budgets and further slash already significantly reduced costs. Indeed, IT executives who responded to a recent Forecast survey by PC Advisor's sister title Computerworld, ranked budget constraints and economic pressures as their Number one challenge in the year ahead. And six out of 10 respondents indicated that even though the economy appears to be improving, the cuts they made in the past 18 months or so will become permanent.

Even more notable is that the projects IT executives say rank highest on their 2011 priority lists are those designed to cut costs even more. Most of those projects fall into three broad categories: revamping and then automating various business processes; consolidating data centers and implementing technologies that help save money, such as virtualisation and cloud services; and outsourcing or using software-as-a-service providers for routine tasks. The idea is that by automating and outsourcing the work that just keeps the lights on, IT departments can focus their valuable staff resources on innovative projects designed to grow the business.

But don't expect a big run-up in IT job openings. For the most part, CIOs don't expect to invest in additional full-time staff next year. Rather, the focus is on investing in new technologies that will automate operations and lower costs - and decrease the need for additional employees. The technologies that survey respondents said they are piloting or beta-testing are server virtualisation, desktop virtualisation and mobile and wireless devices.

"Even in this downturn, we're seeing a significant investment in technology," says Adam Noble, CIO at GAF Materials. So are his CIO peers, he says. "They're not hiring, but their investments are going up."

NEXT PAGE: Investments in some firms are at a standstill

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  2. Investments in some firms are at a standstill
  3. Push-button processes
  4. Running for cloud cover
  5. Austerity yields new appreciation for IT

Meticulous budgeting and economising technologies have helped sculpt trim new IT outfits. Here's how IT will maintain its slimmer shape in 2011.

Energy firm Southern Co's generation business is contemplating virtualising all of its servers and desktops, says CIO Marie Mouchet. "It's an option we're considering system-wide. We have application virtualisation and desktop virtualisation pilots under way. We have had a lease program for our desktops, which we rotate every few years. As they expire, we'll be evaluating moving to virtual desktops," she says.

As for new IT jobs, "we are not looking to hire additional people to meet needs," Mouchet says. Instead, the company plans to upsize and downsize using contractors.

But there are also organisations where investments in both technology and staff are at a standstill. Among them is the Tennessee Technology Center, one of 27 such centers in the Tennessee in the US that, along with six universities and 44 community colleges, make up the area's higher education system.

"One of the biggest problems is that there isn't revenue flowing into the state, and one of the first places they look to cut is education. We're doing without 20 percent of the IT budget we had last year, and last year we had 10 percent less than the year before," says Steve Mallard, the center's IT director.

He says he's looking for any and all ways to keep costs down, including using more open-source software, bringing on student interns to work in IT, recycling hardware, and building 40 percent of the computers and virtually all of the servers in use at the center.

NEXT PAGE: Push-button processes

  1. Economising will continue through 2011
  2. Investments in some firms are at a standstill
  3. Push-button processes
  4. Running for cloud cover
  5. Austerity yields new appreciation for IT

Meticulous budgeting and economising technologies have helped sculpt trim new IT outfits. Here's how IT will maintain its slimmer shape in 2011.

Push-button processes

At the Wisconsin Department of Health Services in the US, automating the area's vital-records systems is the top project queued up for 2011. By making birth, marriage, death and divorce certificates and other documents available electronically, the state hopes to both cut costs and improve services to citizens, says CIO Bob Martin. The project comes on the heels of a recently completed $4m data center consolidation project.

But completing the vital-records project - as well as the dozens of smaller 'cleanup' projects Martin has in the works for 2011 - will be difficult, since the agency doesn't plan to fill the 10 to 15 percent of IT positions vacated through attrition in the past year or so.

Making matters even worse is that across the area, about 35 percent of government employees, including many in IT, are eligible to retire in the next three to five years.

"It's a tough balancing act because at the same time that we're being asked to automate more and more - which makes perfectly good sense - there is a shifting and shuffling of roles and responsibilities among existing staff," Martin says.

"We can't fill those positions, and they may be taken away for good as part of a statewide budget fix," he adds.

Rural Community Insurance Services, which provides crop insurance to the agricultural industry, is looking to revamp and streamline how customers interact with the company online. "Our customers have to do a lot of work and provide a lot of information, but we can actually pre-populate much of that information with data we already have from other agencies," explains CIO Rick Greenwood.

By pre-populating crop data and codes and other information into applications, "we can complete 70 percent of information that customers would otherwise have to key in. After that, all they have to do is validate the information and provide a digital signature, which is a big efficiency," he notes.

"We're looking for internal efficiencies, but we also have to look at how to make our customers more efficient."

Similarly, Jeffrey Pattison, CIO at Inttra Inc, which provides e-commerce systems to the ocean freight industry, says: "We're trying to keep service levels up and keep costs as low as possible." One way to do that is to build more rules-based technology into customer-facing systems, which can then be customised by individual users to streamline their own operations.

"If we can run and grow more efficiently, we can free up more money for  research and development and innovative work," Pattison says.

In the New York State Office of Temporary and Disability Assistance, CIO Daniel Chan's biggest project for 2011 is called Functional Roadmap. The initiative involves working with an outside consulting firm to review just about all of the organization's business processes and then re-engineer them, automating wherever possible.

"Right now, we have 27 different programs that our clients may be eligible for, and each program is administered very differently. We're looking to consolidate to one or two processes from 27 different ways of doing things," Chan says. "Ten [percent] to 20 percent improvement is not acceptable. We're looking for multipliers of five or ten."

NEXT PAGE: Running for cloud cover

  1. Economising will continue through 2011
  2. Investments in some firms are at a standstill
  3. Push-button processes
  4. Running for cloud cover
  5. Austerity yields new appreciation for IT

Meticulous budgeting and economising technologies have helped sculpt trim new IT outfits. Here's how IT will maintain its slimmer shape in 2011.

Running for cloud cover

Chan is also looking outside of his IT organisation for solutions. "I think we spend entirely too much time tinkering with hardware," he says. "Over time, we can outsource most of our IT infrastructure. Instead of buying and building and managing servers, potentially we could engage a cloud provider and rent capacity. We are experimenting in-house with cloud, but there are still a lot of security-related concerns."

Haggen Inc has already extensively consolidated its data center operations by virtualising servers. "Now we're looking at storage rationalisation and optimisation," says CIO Harrison Lewis. "Before, we might just acquire more storage, but now we're looking at Tier 2 and Tier 3 data and moving it off to a private cloud."

A recent internal study showed that 49 percent of data that Haggen had been storing hadn't been accessed in two years. This has prompted a more rigorous review of all IT assets, with an eye toward distinguishing exactly what offers a competitive advantage and should be kept in-house and what should be outsourced.

"If it's not an area where we need to do a great deal of customisation, software-as-a-service makes sense," Lewis says. In 2011, Haggen will be evaluating other SaaS options, including Google's suite of productivity applications. "From everything I've seen so far, it can make sense for us," notes Lewis.

The bottom line, says Forrester Research analyst Bobby Cameron, is that companies will focus on continuing to drive down costs throughout 2011.

"As the IT organisation focuses more on process, they're also consolidating IT, moving to shared services, and there is a huge acceleration in their ability to automate services," he says. "The whole concept of pre-provisioned environments - with cloud and virtualisation - takes automation to the nth degree.

"All of these accelerants are going to continue to drive down the cost of delivering IT," adds Cameron, not only in 2011, but for the foreseeable future.

NEXT PAGE: Austerity yields new appreciation for IT

  1. Economising will continue through 2011
  2. Investments in some firms are at a standstill
  3. Push-button processes
  4. Running for cloud cover
  5. Austerity yields new appreciation for IT

Meticulous budgeting and economising technologies have helped sculpt trim new IT outfits. Here's how IT will maintain its slimmer shape in 2011.

Austerity yields new appreciation for IT

Next year's technology budgets are mostly flat, and cutting costs remains a top priority, but it's not all gloom and doom for IT.

In Chan's case, his most experienced staffers are retiring at an alarming rate and taking years of institutional knowledge with them. In an effort to mitigate those losses, the agency is re-engineering and automating as many of its processes as possible; it's also using dashboards to better monitor expenditures and manage approval processes in a timely manner. Nonetheless, it's still looking to fill 50 jobs in the next few months.

"Our strategy is to bring in new talent from the outside, with the hope that they will look at things differently as to how we can improve our processes," says Chan. He adds that the move to automation has yielded a big unexpected benefit: "IT is a lot more joined at the hip with really high-level executive management within the government because they're seeing more and more the value that technology can bring to the table."

Other CIOs tell similar stories.

At GAF Materials' Noble says IT received a slight budget increase for 2011, thanks in large part to the ROI generated by investments in new IT systems during the previous two years, most notably a unified communications system for the customer service call center. The system enables customers to place orders via the Internet instead of doing so over the phone. GAF has since launched a pilot to see if chat can be incorporated into the process.

Phone orders now represent the smallest percentage of overall orders. "It has completely flipped from two years ago, when 80 percent of our orders were taken by phone," Noble says. "We still have customer service people, but now we can use those people for other things, like up-selling." The call center has also reduced costs by 10 percent. After presenting those results to the company's board, Noble says, "we talked about where IT can make additional investments, and we got a slight uptick of five percent in the budget."

PHI's Quinn is helping to research and negotiate business matters far outside the realm of hardware, software and services.

"I just met with our CEO, and we were looking at a technology company in the roofing industry that has nothing to do with standard IT," Quinn says. "Because I'm heavily involved in negotiations and I understand how technology can impact the business, I was called in." As he sees it, "IT is almost becoming an extension of the research and devlopment organisation. Everyone talks about innovation and they look at my organisation."

IT is also in charge of a companywide cost reduction program at PHI. "The initiative is being run by IT, which was chosen to lead it because of our project management experience," Quinn says.

Going forward, "I think IT will continue to be a front-runner in helping companies survive," he says. "What's going on [in the economy] is actually elevating the importance of IT. There's a huge opportunity for IT to come to the forefront of a company and show its worth."

See also: 12 free downloads to beat the credit crunch

  1. Economising will continue through 2011
  2. Investments in some firms are at a standstill
  3. Push-button processes
  4. Running for cloud cover
  5. Austerity yields new appreciation for IT