In 
Sarvesh Rana was befuddled. He had just stepped out of the third presentation on a foggy winter morning in Delhi. He had been looking for advice from consultants to help him enhance productivity at his Rs 150-crore auto ancillary company.
All the presentations that day suggested adding a new CRM application and tweaking the existing supply chain system with some additional hardware and more software. Most of these systems would pay back for themselves within a year or two, promised the guys in blue suits.
Somehow, Sarvesh felt this approach to enhancing productivity was counterintuitive. He desired simplicity. Unknown to Sarvesh, something similar, at a far larger scale, happened a few years ago.
Mark Hurd took over the reins of HP in early 2005. His single-minded focus to trim costs was as clear then, as it is now. Some of the hard decisions he took then seem so simple and commonsensical, with the advantage of hindsight.
Hurd at HP
Hurd came in during good times and sliced off 15,200 jobs, or almost 10% of the companys headcount. He then led the initiative to slash the company-wide use of applications from 6,000 to 1,500. Hurd also forced a consolidation of HPs data centre, bringing down the number from 85 to six! And HPs own IT department was slimmed down to 8,000 from the original 19,000 people. All this, Hurd made clear, was with the intent to hire more sales staff.
The results are clearly reflecting on HPs balance sheet today. Hurds unwavering attention on trimming costs, both capital expenditure (capex) and operating expenditure (opex) have seen HPs bottom line grow even in hard times. HP recently forecast that sales for 2009 would decline as much as 5%, but Hurd still is projecting a nearly 6% rise in profits.
Sarvesh decided that he would make no additional investments in IT. Lets get more juice out of the existing facilities, and reduce operating costs, he thought.
Outsourcing the companys IT organisation seemed like an intelligent and easy answer, but Sarvesh knew that the theory and practice of outsourcing were entirely different things. He knew that once he decided to outsource, it would expose his company to new forms of risk. An inferior supplier of outsourced services would only dent his relationship with his suppliers and customers, he thought. Sarvesh wanted to adopt a common pragmatic approach to reducing his operating expenses on IT without having to issue pink-slips.
The stepping stone
Taking the lawnmower approach to cutting costs may be faster and involve less effort but it runs the risk of endangering future business outcomes. Experts suggest that the first step in understanding what to cut is to find out where business has its costs. Business areasor domainsthat are consuming a lot of IT services (and thus cost) may be doing so in a strategic or tactical drive. Thats fine. But if its due to sloppy business processes or inefficient IT support, there is an opportunity to drive potential IT savings.
A recent study by Savvis, an outsourcing provider of managed computing and network infrastructure for IT applications, reveals that the drive to reduce operating costs is a concern among IT managers at a global level. The study shows that nearly two of the five IT managers surveyed felt that standardising IT infrastructure solutions could help cut costs.
Confirms Dhiren Savla, CIO at Kuoni India: We have, in the last one year, saved a huge amount of money by just standardising applications and support for all the 44 countries we operate in.
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