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Think Twice on Replacing IT Talent

17 Apr, 2009 By: Phil Fersht imageSource

Think Twice on Replacing IT Talent

There’s currently a certain sense of déjà-vu within the IT
community, as companies look at shaving even more cost out of a function that
has been battered since the 2001 dot-com bust. However, when we look at the
lessons of the past, you do have to question companies which decide to sharpen
their knives once more when they address their IT costs. Companies need to
offset the cost of every layoff with the cost of replacing that talent when the
economy improves. It is not so much who is left standing, but rather who is in
position to grasp the brass ring of prosperity when it returns.

If economic conditions improve in 2010, then the amount of
costs saved by releasing an employee may only be $50-100K by the time all the
lay-off costs are incurred. How can you put a price on replacing the inherent
business knowledge of that staff member when you re-hire a replacement? It may
take another year or two to get the replacement up-to-speed, and will not only
end up costing you more, but may also impede your executives from accessing
critical data in a timely fashion. The overall cost of replacing that staff
member could easily be three times the costs saved by laying her off.  And these easily identified direct costs are
only the beginning; the costs incurred to your culture and morale can prove
even more damaging.

Past to Future

There are lessons to be learned from those who did it right
and those who failed to do so during the recession of 2001. The frequently
cited observation by George Santayana warrants consideration, “Those who do not
remember the past are condemned to repeat it.” Furloughed IT employees in the
RIF of 2001 were often reluctant to return to their previous employer. Having
been viewed as expendable, the trust and bond between the two may have become a
casualty. Often the company belatedly discovered the employee was not at all

Companies often failed to realize that internal technology
is an ongoing work in progress with parts of the past moving forward into the
future. With essential team members no longer on board, projects bogged down
due to a loss of internal expertise. If new employees were brought in, there
were reduced capabilities with a learning curve to scale brought on by a unique
IT environment.

Strong Hold

IT is the glue that provides the connectivity within an
organization and its stakeholders. Every environment is unique, often featuring
proprietary software and customized legacy systems. The complexity and
diversity that results are best left in the hands of those who understand and
are familiar with it. In 2001,  firms
laid off across the board only to discover that when times improved and IT
projects resumed, many key people needed to implement them were no longer
available. When entering into new engagements, some companies discovered that
the chickens had come home to roost and that they were in the coop.

Whether outsourcing or aligning with business partners,
management teams are built involving IT.  While outsourcing provides access to technical skills to support your
tactical software support and maintenance, it rarely provides the inherent
understanding of your business processes and environment that several of your
key staff have.

Companies facing the challenges of 2001 with the foresight
to prepare for renewed business opportunities in the future fared well. Being
reactive to the recession, they became proactive in their business. As opposed
to across the board cuts, they applied due diligence and root cause analysis
into their business. They prioritized strategically. In so doing, they were
able to make adjustments to reduce unneeded expenses. Much of this involved
taking advantage of global labor arbitrage for routine work. They also invested
in initiatives to improve the business, often involving technology. It became
apparent that the success of these initiatives was very much tied into keeping
their key IT in-house people on the team.

There is a form of a parable concerning competitors who are
prepared and those who are not:  Two
friends were walking in the forest when a bear came after them. They both
turned and fled. One was not in very good condition and he breathlessly called
out to his fit friend who was jogging ahead, “You need to outrun the bear!” “No
I don’t” came the reply. “I only need to outrun you.”

The current economic morass will not produce winners, but it
will produce companies that will be in a more favorable positions to take
advantage of opportunities at the expense of their more sluggish competitors,
even when times improve. Cutting people that shouldn’t be cut can be cutting
your throat.

of Phil J. Fersht, Research Director, Global Business & Outsourcing

AMR Research, Inc. Contacts: www.horsesforsources.com and href="mailto:pfersht@amrresearch.com">pfersht@amrresearch.com.

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