We are seeing a lot of chatter right now in the blogosphere about the impact of the economic downturn on IT spending and strategy.  Lots of stats as to how the spending is going to change, how to invest during the downturn, and what posture will be most effective.  Some of us who have been through this before, and were in need of any significant reduction in spend have a clear answer - rip & replace!

Nothing is as compelling as economic necessity to advance change to the status quo.  In a prior post here I cover the clear advantages of moving to SaaS and open source solutions within the IT portfolio. For those who have not taken these steps, now is still a good time. What I have found in the past is that when you do the math, you can in fact lower cost by taking on a new implementation project to replace a legacy system that is expensive to maintain, even during period of tight spending.

An easy example of this was at my last company when we ripped out our project accounting solution, replacing it with a SaaS based solution, and at the same time moved the remaining financials to an on demand offering.  The cost of the implmentation project plus the first year subscription was less than the maintenance fees on the licenses and the associated DBA costs during the first year alone. There was a one time write off of the now unused portion of the legacy asset, and we were done.  Best yet, the consumers of the new solution preferred it to the legacy model, and we gained all the benefits of a focused SaaS vendor solution vs. the old platform.  Say ‘Yes’ to R&R!

 

Megan Goodchild posted this entry titled “Cut Costs with Technology” where she lists several basic things companies can do to save money during the downturn.  While I was pondering a blog entry about the savings we have been realizing with open source and SaaS based software decisions, her note reminded me to make a quick post here about something simple we are doing at Ingres with video.  We recently began using the video cameras that come with recent notebook computers, or USB based commodity cameras, along with Webex to do lightweight video conferencing.  Up to 6 participants can join and share their lovely mugs during meetings.  Could this cut down on travel a bit?  We hope so - and this makes the list as a simple step towards savings.

 

CIO’s as Investors

CIO’s are required as a primary role to be investment managers. The company is acquiring technology assets and we carefully choose our investment strategy against a matrix of objectives. A primary objective is to select solutions which exceed or can be extended to exceed the requirements of the business, so that these solutions are flexible, extensible, and can grow with the business. At the same time we are required to invest wisely. CIO’s spend much of their time managing the selection process, managing the resulting investment portfolio, and assuring returns.  On the whole, too few CIO’s have made the switch to open source and SaaS based sourcing strategies. This latest downturn should change all that.

The Old Model

Fundamentally, the model within which these investments have been made in the past, focusing on perpetual license models, is obsolete. In good times, it is inferior simply due to the large inordinate up-front cost to acquiring technology. In an economic downturn, it’s worse than inferior, as the company finds itself with sunk costs that cannot be recovered in lean years. (more…)