Beware of becoming too lean in a recession

Beware of becoming too lean in a recession

Organisations that are looking to process improvement methods in the current environment are too late, as the economic tide might turn before it delivers cost takeout, says Ovum.

Organisations that are looking to process improvement methods in the current economic environment are too late, as the economic tide might turn before it delivers cost takeout, said research firm Ovum. While commonly used approaches such as Agile and Lean can reduce waste in IT systems and software development, they don't offer the rapid efficiency gains that chief financial officers (CFOs) are increasingly demanding of chief information officers (CIOs).

Their implementation takes too long and is too resource-intensive for an organisation that's currently reviewing its IT processes.

"A lot of CFOs have heard that process improvement can cut the cost of IT processes, and in the current economic environment, that's very appealing," said Dr Alexander Simkin, a senior analyst and process improvement specialist within Ovum's IT services practice.

Educate the CFOs

"What they don't realise is that becoming Agile or Lean takes time and requires major change management. If you're starting from a base of traditional processes, these approaches won't provide rapid cost reduction. The efficiency of your processes may even get worse before they get better. CFOs need to know that and it's a CIO's job to educate them," Simkin said.

Organisations that already have an established process improvement programme aimed at waste reduction in IT have a competitive advantage in the current economic situation. However, when the economy eventually improves, the cost-cutting agenda will wane and other priorities such as improving the quality of processes will come to the fore.

"Organisations that are only now seeking to improve their IT processes should consider methods that are optimum now and beyond the recession, that is, that both cut costs and improve quality. Lean Six Sigma is a good choice," advised Simkin, based in London.

Methods that audit and certify the maturity of an organisation's IT processes such as the Capability Maturity Model Interactive (CMMI) and the International Organisation for Standardisation's ISO 20000 are also attracting renewed interest in the recession. These methods provide CIOs with evidence to C-level colleagues and other stakeholders that investments in process improvements are providing returns.

Defence and healthcare

For IT services vendors, they have another advantage: they make those vendors eligible for contracts that stipulate minimum levels of process maturity. Two sectors in which IT service contractors typically have to certify the maturity of their processes are defence and healthcare, especially in the US.

"Defence and healthcare have been relatively unscathed by the recession, so being able to bid for contracts in those sectors is increasingly important. Hence some of the extra attention that audit methods are currently receiving," Simkin said.

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Tags strategyCIO roleeconomic crisisdownturn

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