India Inc's Cost-cutting Fixation Not Good

by Tabrez Khan    Feb 19, 2009

The recession has changed significantly the dynamics of IT strategy globally as well as India. Cost-cutting is among the top priorities for companies globally. However, excessive focus on short-term cost cutting is not the right strategy according to analysts.

According to Partha Iyengar of Gartner a significantly positive trend has been the narrowing of the technology gap between India and the West. This is borne out by the fact that the top three priorities for Indian and global businesses in terms of both business and technology were the same, pointed out Iyengar.

The top three priorities for businesses globally in the current recessionary environment are;
1) Improving Business Processes
2) Improving workforce efficiency
3) Reducing Cost.

However, these priorities were not in the same order of importance for Indian companies and global ones. For Indian companies the number one priority was cost-cutting said Iyengar, while global companies were more focused on improving business processes. Cost cutting figured lower in the global companies scheme of things unlike their Indian counterparts, said Iyengar.

Iyengar said Indian companies excessive focus on cost-cutting was an unfortunate trend especially since it was the West that was more hit by the recession, and also since Indian companies are the ones that need to focus more on improving business processes.

Peter Sondergaard, global head for Gartner Research said that while IT-related cost-cutting was an important objective for organizations in 2009, they need to take a strategic, multi-year approach to cost cutting rather than blindly cutting costs in the short-term.

One outcome of the zeal for IT-related cost-cutting in the current environment is that CFOs, and even CEOs in case of very large IT investments, are becoming approvers of technology, said Sondergaard. However, this is a temporary trend, said Sondergaard, and in the long-term the CIO has the opportunity to become an important part of the enterprise agenda since IT is becoming pivotal to bringing cost-related and other efficiencies in the organization.