CIO of Carestream, Bruce Leidal, was asked to cut IT cost relative to revenue in half over five years. He explains how he addressed the challenge.
Since the beginning of the economic malaise in 2007 and increasingly in 2008, IT department have been asked to slash their budgets, as other departments have been asked to do the same. For many companies where IT is a relative black-box to those outside of the department, these cuts were made with machetes rather than with scalpels all too often, and as a result, fat and muscle were cut away from the department. This has led to a difficulty among these same departments to switch gears toward growth opportunities, as some of the most innovative (and expensive) resources are no longer a part of IT.
I have been pleased to find a growing number of CIOs who are able to balance cost cutting and innovative thinking in their minds, and use reductions in costs as the justifications for increases in funding geared toward innovation.
Bruce Leidal is the CIO of Carestream, a $2.4 billion company that develops , sells and services imaging products and software for the dental, medical and non-destructive testing global marketplace. When Leidal joined the company in 2008, spending on IT was 3.0% of revenues. An external benchmark study suggested targets for each of the functions in the company, for IT this was 1.5% of revenue. To ensure competitiveness in the throes of the downturn, he, like other execs at Carestream was asked to reduce costs to the benchmarks. Bruce was asked to achieve this target within five years. He developed a five year plan to get there, realizing it was quite a short time horizon. Within a year, with some demonstrated progress, the company asked him to shorten the time horizon to accomplish this in four years rather than five. Unfortunately, demand for IT services were not decreasing at that pace. He realized that something had to be done. As he put it, “We had to shift gears and tell the story of IT to our colleagues outside of IT.” He followed a multi-step process in order to accomplish this.
- For the purposes of telling the IT story for his current company, he defined IT cost drivers as opportunities and risks.
- Next, Leidal defined opportunities and risks at a more granular level.