| QUESTION & ANSWER |
An IT budget provides opportunities for a CIO even during recession |
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By Anil Patrick R, Chief Editor, SearchCIO.in
06 Oct 2009 | SearchCIO.in |
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Global recession has affected Indian budgets, but CIOs need to spot the golden lining. Sunil Mehta, senior vice president and area systems director (Central Asia) of advertising giant JWT, explains how Indian CIOs should prioritize their IT spends.
Considering the tough economic scenario, what do you think will be the biggest challenge for Indian CIOs and organizations this year?
Sunil Mehta: The biggest task for Indian CIOs this year will be prioritizing spends. Companies will be evaluating every budget -- including the IT budget -- in much more detail and at [greater] length than ever. So the CIO will have to handle IT budgeting very carefully. On the other hand, many Indian organizations are identifying situations that can be converted into opportunities during such tough times. These aspects present challenges as well as new opportunities for India CIOs.
Now is the time when Indian CIOs must start thinking like a CEO and CFO, as well as an entrepreneur. If you were at the helm of the company, how would you think? However, if you just act like a techie instead of making this transformation, it doesn't work. This year presents a great opportunity for CIOs to reach the top management level of their respective companies if they haven't managed it already. If they can showcase their skills, this is the time for them to break newer ground.
So how does a CIO prioritize requirements in the IT budget?
Mehta: When times are good, you can look at upgrades and even noncritical items at times. However, you certainly don't want to look beyond top priorities in tough times. In India, every department feels that their requirements should have top priority. This is why you need to prioritize requirements into three [areas]: "must have," "should have" and "can wait." In "must have," you include things that cannot be done without, since there's no compromise on those.
What about the "should have" and "can wait" items?
Mehta: Many a time, you can postpone an application deployment or something similar. However, it's possible to achieve these as well depending on how you budget. There are many creative ways to postpone your payments or strategize such that you nicely schedule payments. For example, many Indian vendors offer the deferred-payments option. You can discuss this possibility with your vendor partners in advance and decide payment options. Alternately, an item which goes over your budget can be always accounted for in the next period. So you have met your budget as well as the company's requirement, which is the top priority.
You can always postpone hardware upgrades. You need not have a new machine every three years. You can extend it to four years, since that's not going to hamper operations. However, you may realize that it's better to change a machine than go in for a new annual maintenance contract. So whether you want to put it in OpEx or CapEx is a burden that you need to balance at times.
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In India, every department feels that their requirements should have top priority. This is why you need to prioritize requirements into three [areas]: "must have," "should have" and "can wait."
Sunil Mehta
Senior VP and Area Systems Director (Central Asia), JWT
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How cost-effective are measures like leasing and renting?
Mehta: We don't work on leasing concepts anymore, since it turns out to be very expensive. You don't own the asset, and retiring it becomes an issue. We don't go in for rentals either unless if it's very critical, but doesn't need to be owned. Instead, CIOs can look at options like videoconferencing so that productivity and efficiency are bettered. You want to save on your travel and time expenses as well. There's no harm in having two shifts. When budgets are tough, you can look at double shifts and so on to optimize resources and manpower.
Are there any ways to obtain savings on the annual maintenance contract (AMC) front?
Mehta: Options like AMCs definitely offer scope for mutually beneficial arrangements. For example, if a vendor partner justifies his new rates as increase in costs, you can opt for a longer tenure at the same cost. Instead of 12 months you can negotiate for 15 months or even two years. This benefits the vendor as well since he can show it on his balance sheet.
How can the CIO turn ROI measurements to his benefit when justifying an IT investment?
Mehta: Since ROI is not just a number, one has to start looking at the entire matrix. However, at the end of the day, no matter how many presentations you make to the management, numbers matter the most in Indian organizations. Since it's a matter of survival, the pure cost-benefit analysis clearly plays a great role in justifying the investment.
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