CIOIN

Tamal Chakravorty, CIO India, Sri Lanka, Nepal and Bhutan

Ericsson

“To remain competitive, it was important to cut costs drastically -- yet keep IT services unchanged. We cut IT costs by 8 percent on a per head basis.”

Executive summary

CIO 100 Winner: Tamal Chakravorty first created business SLAs (BSLA). Then he consolidated applications, jobs and datacenters and ensured services were wrapped in small packets to make them suitable for a pay-per-use model.

Ericsson India, part of the Sweden-based Ericsson AB, manufactures communication equipment. It's an extremely competitive business, made harder by the company's Chinese rivals. "With revenues under pressure and margins dipping fast, it was important for the business to cut further costs to remain competitive," says Tamal Chakravorty, CIO India, Sri Lanka, Nepal and Bhutan, Ericsson.

And the business had a clear mandate for IT: cut IT cost by 12.5 percent on a per head basis -- with no disruption to IT services . "IT costs are about 4 percent to 5 percent of total turnover and in some IT-centric businesses like R&D or network services, it is as high as 15 percent. This makes it a natural target for cost reduction. To remain competitive, it was important to cut costs drastically -- yet keep IT services unchanged,' says Chakravorty.

To do that Chakravorty had to first create business SLAs (BSLA). "It was extremely difficult to get the business to understand IT costs," says Chakravorty. "Setting the right BSLA was difficult as everything needed to be translated into a cost and then demonstrated. It took long negotiations to hit the right price point."

Then he consolidated applications, jobs and datacenters and ensured services were wrapped in small packets to make them suitable for a pay-per-use model. He also got business to sponsor some of their own people to handle IT as 'business partners'.

Despite the strong business need, cost cutting saw was uphill work. For instance, it was extremely difficult to move datacenters from different locations and locate them centrally with change management issues cropping up. "IT was spread throughout the organization seamlessly, hence it was necessary to declassify each part of an IT service and look at it modularly and dispassionately," says Chakravorty.

All the pruning cost the company Rs 3 crore got it closer to its goal. IT has managed to reduce spends by 8 percent on a per head basis. Yet this did not result in the diminishing of any IT service. Customer satisfaction dipped marginally as a result of cost cutting, says Chakravorty. The ROI of these measures is expected to be achieved between one to two years.