Study: Layoffs Not Needed To Save E-Businesses

Are there ways for dot-coms to trim the fat without resorting to layoffs? According to a study released Wednesday by Gartner, the answer is a resounding yes.

The study, "Nine Ways to Cut Costs and Save E-Business Initiatives," outlines the ways in which chief information officers can improve the cash flow of e-tailers by focusing on changes to information technology (IT) infrastructure, rather than by slashing e-commerce programs.

"If you must cut your budget, look to the everyday areas of your technology," said Gartner vice president Kenneth McGee. "CIOs have the opportunity to save e-business plans and jobs by mining cash savings from the implementation of some of these (IT) proposals."

In fact, employee layoffs are often a quick fix to save money that can actually hurt the enterprise in the long run. According to the report, large, billion-dollar companies can save between US$2 million and $5 million with proper management of their operations groups.

"Human capital management is key to maximizing staff on the most important projects during downturns," said McGee.

Equipment Overhauls

Many of the suggestions found in the report involve making quick changes to IT equipment and networks. For example, McGee suggests that e-tailers consolidate any multiple contracts (voice, data and mobile) they have with a single network service provider (NSP).

"By aggregating the spending into one total amount, the NSP should grant a higher discount to the enterprise," McGee said. "Consolidating the enterprise's network spending into one figure to get a higher discount is relatively simple and involves no physical changes to the network."

Companies should also re-evaluate the equipment they use for output services such as copying, faxing and scanning. McGee says these machines can cost companies between 1 percent and 3 percent of revenue. By using newer, "rightsized" technologies -- for example machines that perform multiple output functions -- enterprises can save significant revenue, the report said.

Virtual Offices

Next to labor costs, maintaining work facilities is the second highest cost undertaken by businesses, the report said. Companies should examine their software and hardware usage levels by taking inventory on their systems and storage. By transitioning to "virtual" offices, companies can save millions of dollars without slashing jobs.

"Large global companies realize a 10 percent to 15 percent reduction in infrastructure costs by trading 'bricks' for 'clicks,'" McGee said.

Total Cost Analysis

Rather than cutting staff, other budget adjustment decisions can be effectively made by measuring costs through the use of business activity monitoring, e-metrics and total cost of ownership (TCO), according to Gartner.

By analyzing TCO areas such as the diversity of a company's desktop operating systems and office suites, the variety of service levels, the number of physical moves made by personnel, the number of physical desktop locations, and the frequency of major software rollouts, e-businesses with revenues of $1 billion to 5 billion can reduce IT support by $4 to $6.5 million, the report said.