In the face of mounting economic pressure, many government agencies are looking for ways to reduce their costs. One of the first areas to be affected is usually human resources, since this typically accounts for the lion's share of operational costs. When it comes to IT support (another, usually large financial burden), government IT managers and CIOs are being asked to review and reduce IT support center resources and study the cost benefits of outsourcing service components. Here the challenge is to know which elements of the IT environment are best kept in-house (often as much a control as a cost issue) and which can be cost-efficiently handed over to an external service provider.

Doing More With Less

The directive by government to reduce IT spend usually comes with the instruction that service levels, especially those that are citizen-facing, should not be endangered. In other words, IT departments must find more with less while retaining the same, or better, quality of service. This is a balancing act that is often very difficult to get right. The Catch-22 is that the strategy to cut costs and improve efficiency is usually expected to be won using new technology. The problem is that in a recession, new technology investment is likely to be cut as well. That leaves only one option: increasing the efficiency and productivity of existing infrastructures and service units.

Photo: Paul Michaels, director of consulting, METRI/Photo courtesy of Paul Michaels, METRI

Which Bricks Are Load-Bearing?

So, given all these challenges, how does a government agency identify the people, processes and technology components that can safely be downsized, eliminated, improved or outsourced? To use an analogy: Which bricks can be safely removed from the structure without causing the edifice to collapse?

Making an informed decision about the structures that sit at the heart of an organization is best achieved by a scientific, fact-based approach and cannot be left to subjective reasoning alone, or at worst, best guesses. CIOs must have access to objective benchmarks on key performance indicators (KPIs), best-practice processes, competitive market pricing and a range of other metrics.

Unless this review is based on a thorough analysis, making random staff cuts or freezing IT projects can have more serious and negative long-term cost implications than near-term savings. Often managers take a "do-nothing" stance when spending restrictions prevail, on the basis that people rarely get fired for not losing money, even if the lack of investment leads to greater opportunity loss. In the long run, this lack of action seldom benefits the organization.

Measuring Value

To accurately measure the value of an IT service, one cannot look at cost in isolation. This is because the per-head cost for providing, say, desktop, help desk or e-mail support services (whether in-house or outsourced) may be $10 at one government ministry and $25 at another. At first glance, the second price may seem expensive. And yet the $25 per-head option may deliver a higher overall business advantage that enables the CIO to deliver a superior product or service and so be more competitive, thus justifying the additional cost.

Meeting Business Needs

Likewise, the cost of an IT employee, service team or support center must be measured against KPIs, such as rates of productivity. A cost may be low but performance may be even lower. And yet measuring cost-to-performance ratios alone can also be misleading. Costs may be minimal while the productivity volume is high, and yet the result of this output could be poor, inefficient or misaligned to business needs. It may be wide of the mark