When Frugality Hurts: The Pain of Cutting Resources to the Quick

By Kenneth Hess (Send Email)
Posted Nov 5, 2009

Now that you've had a chance to recover from your Windows 7 launch party, your focus should have shifted to your 2010 budget. It's time to put pen to paper again and decide how to make a fraction of a real IT budget work for an entire year's worth of needs. It's tough, and you must be careful not to blindly slash away at essential services, personnel and equipment too severely. Have you ever cut a fingernail to the quick? It hurts, doesn't it?

Cover Your Assets: How do you know when you've trimmed too much budget, too much staff and consequently, too much profit? Because it hurts when you do that.

In our zeal to excise dead wood, dying branches and sprawling growth from our ailing and failing companies, it's possible to cut off too much and it hurts — often to the point of agony for the surviving members. Being frugal and fiscally responsible are noble quests, but is there a point at which productivity and profitability suffer for them? Yes, there is. And, if you're experiencing pain, you've surpassed that point and cut your company's productive resources to the quick.

If server consolidation, virtualization, budget liposuction and staff reduction have left you in a productivity lurch, what can you do to reverse the injury and heal your pain? Your options are to outsource critical services, investigate cloud or hosted computing, or hire contract labor until you can remove your company from life support.

Service Outsourcing

Third-party service companies exist for almost everything. From telephone answering to transcription to virtual office assistants, you almost don't need your own office any more. To save more money, you could use a cubicle or telecommute and use your outsourced services to maintain your "office" presence. Service companies often include the option for you to use their services on an as-needed basis using a pay for what you use contract. It's more difficult to budget for irregular use services but in lean times, you'll only pay for lean use.

Using outsourced services also allows you to choose other providers should you find your current one less than satisfactory. Avoid firms that offer only long-term engagements.

Cloud or Hosted Computing

If you've had to downsize or completely dismantle your data center, hosting computing services and cloud-based computing is worth a look. For as little as $20 per month each, you can lease virtual servers to host your applications. You don't have to worry about system-related security, maintenance or hardware failures since your service agreement guarantees availability. And, if you've had to decrease your experienced technical staff numbers, host your email elsewhere. Standard Unix mail and Exchange are standard offerings from hosting providers.

Contract Labor

Contractors. We see them come and go in large companies. When times are good, companies hire contractors because they can't find employees. When times are bad, former employees become contractors to make a living. Love them or hate them, contractors have a place in the work force, a very valuable place.

If you've shed too many employees to keep up with the demands of your business, you must act fast to rehire your old employees or to hire new ones as contractors. Contract labor works out well for you because contract employees cost less and hire-on at-will, for a specific period or for a single task. The downside of contract employees is the element of control or your lack of it. Since contractors don't fall under the same guidelines as regular employees, your lack of control over their arrival and departure times, regular availability and motivation level might have a less than positive effect on your project's outcome than you anticipate.

Your ability to wisely manage your company's resources, or lack thereof, is key to its survival. As any IT person worth his salt will tell you, having a good backup plan is essential to business continuity. If employees and in-house services are too expensive to manage, use outsourced services, hosted computing resources and contractors.

The best strategy, however, is to learn to anticipate the highs and lows of your business and react intelligently, so that you don't cut yourself to the quick. Remember, if it hurts when you do that, don't do it.

Ken Hess is a freelance writer who writes on a variety of open source topics including Linux, databases, and virtualization. He is also the coauthor of Practical Virtualization Solutions, which is scheduled for publication in October 2009. You may reach him through his web site at http://www.kenhess.com.

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