If youve been listening to industry dialogue lately, you justifiably might be a bit perplexed. There are those who assert the worst is over for the ever-shrinking insurance IT budgetanalysts tentatively suggest there may be a few nickels more to spend in 2004 than last year. Then there are others (usually in the trenches) who believe IT spending will continue to be under the microscope and fully expect, say, a mandate for a 10 percent or 15 percent cost reduction year after year. These IT folks indicate they will comply because theyve got little choicethe sharks are circling, they claim, and they have to offer up some sacrifice to keep the sharks at bay.
Although the pendulum may be beginning to swing toward better times, well likely see both of the above scenarios in 2004 as we try to disengage ourselves from the economic treadmill weve been on and strive to move forward. If we view the future optimistically, industry insiders point toward certain key near-term projects where they believe theyll be spending their hard-won dollars (for more on spending trends and tactics for tight budgets, turn to Seeing the Light, p. 16). Of course, that still leaves unanswered the question of how to handle other cases in which additional cuts are required and may begin to hit bone or where larger-scale initiatives need to be implemented to remain competitive and meet customer expectations.
Whether companies are spending short or long term, or not at all, there needs to be a discussion to connect the dots for the business side regarding the cost of keeping costs down. Granted, no one wants to be the bearer of bad news, but not connecting the dots creates a void of understanding. In the business/IT partnership, thats become a missing link.
If IT is spending on quick-return implementations, then it has to be able to enlighten the business side as to the opportunity cost of not spending on bigger-bang projects. If cuts are required, IT needs to tell business that for every five or 10 or 20 percent cut, this is what business willand wontget. Is business OK with a help desk that runs ev-ery other day? Is it OK not to have standardized desktops, and what is the true cost of every employee using his or her own software? Does business realize a cut on the IT side could mean less income on the business side? Does business realize IT spending could mean more income from business? And if IT costs are going up, might this also be generating savings elsewhere?
Hopefully were at the start of a year with healthier balance sheets. But the lessons the industry has learned probably wont be forgotten any time soon. If theres one challenge IT should consider tackling in the coming year, its to be certain the business side comprehends the true costs of cost containment.
All players need to understand the real and global impact of all actions to make the best possible decisions. This is insight IT can bring to the business/IT partnership, and it could make ITs job easier as the year unfolds.
Sharon S. Schwartzman
Editor-in-Chief
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