E-BUSINESS SPECIAL REPORT

Anatomy of a Skeleton Crew

As the U.S. economy continues to traverse shaky ground, companies are askingmore of their IT departments. “Overwhelmingly, what companies are doing ismaintaining the existing IT capability and trying to run that more efficiently with fewer people, fewer resources and fewer inputs into the system,” Yankee Group program manager Andy Efstathiou told the E-Commerce Times.

The root of the problem is that many companies, large and small, have pressing IT needs that are not about to disappear — but they also have far less capital than they once did.

The question is this: how can a company cut IT staff without doing more harm than good to its bottom line? What is the anatomy of a skeleton IT crew?

Going Forward

First, cash-strapped companies must realize they cannot completely axe their IT staff. “At a minimum, what needs to remain in-house atfirms are managers who understand IT and can make correct strategicdecisions,” Efstathiou noted.

Any unique IT development or implementation that provides competitivedifferentiation for a firm also must be kept in-house. In the banking industry, for example, companies like Bank One have analyzed their IT capabilities and decided to bring some functions back into the corporate fold.

In addition, some companies in the past decentralized their IT operations as their business units became more autonomous. It is now time to bring thosefunctions back under one roof, according to Symons. “One of the ways to reduce costs, improve efficiencies and utilization rates, and get economies of scale is to centralize,” he said.

Measuring IT Staff Size

In an effort to gauge the correct number of IT staff members, some businesses have attempted to develop one-size-fits-all formulas. In the education sector, for example, three models exist. One method attempts to calculate the cost of each workstation deployed by a school district or university over a period of several years. A second uses ratios that determine the target number of IT staff members as a function of the number of PCs deployed — say, 1:50 or 1:250.

A third approach, called the Athena Project Formula, gives additional weight to the technical support of highly complex systems, rather than relying on simple ratios of technical staff to computers.

Those methods, though, apply only to education. And even in that field, nosingle magic formula exists. Overall, trying to use a set model to determine appropriate IT staffing levels is impossible, Efstathiou said.

Craig S. Symons, vice president of IT management at Giga Information Group, agreed. “Every company is a little bit different — they have different organizationalstructures, different cultures. Some are at different stages of implementation, others are at post-implementation stages. All of those are variables that determine staffing levels,” he told the E-Commerce Times.

Replacing Internal Staff

When internal IT staff must be downsized, businesses can turn to external sources to do the technology work that still needs to be done. An outsourcer can help an IT department run more efficiently and at a lowercost, because it can spread fixed costs and fixed requirements across a broad base of customers.

“Therefore, you don’t need a database administrator for firm A and adatabase administrator for firm B and a database administrator for firm C,”Efstathiou said. “Maybe you can get by with two database administratorsmanaging the databases for three firms by outsourcing.”

A trend of hiring offshore talent also is gaining strength. In India, workers are paid roughly one-fifth as much as their U.S. counterparts — a big costsavings for companies. A recent PricewaterhouseCoopers survey showed that businesses can save between 35 and 60 percent by outsourcing IT staffing to a foreign country. So-called “near-shore” workers from places like Canada also are being tapped.

The bottom line is that companies will always need some kind ofinternal IT staff — so they should be careful where, and how deeply, they cut. “[Businesses] can postpone projects and try to get by with less,” Symons said. “But I don’t think you can really afford to stop completely investing in IT.”

1 Comment

  • Cuts tend to cut down, unless some young (surviving) IT turk discovers a new technology to save everybody’s bacon. A disruptive technology. My question, why is anybody still writing code? At least one technology I’m aware of — TenFold’s Universal Application — can infer 90% of an application just from the database schema. And Apple’s new web services announcement seems to legitimize my notion.

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