Compass Says Global Economic Crisis Best Chance since Y2K to Modernize Applications.

Top performers see crisis as window of opportunity to replace legacy systems, reduce operational costs by up to 40 percent, and enhance competitiveness

NAPERVILLE, Ill. -- By creating an urgent demand for significant cost reduction, management consulting firm Compass says the current economic crisis provides an opportunity to streamline application environments, drive significant savings, and position businesses for future success.

"Businesses today face unprecedented pressure to reduce expenditures," says Tim Pacileo, a Compass principal consultant. "Complexity in the application environment is a major driver of continued cost escalation. As in Y2K, top-performing companies will take advantage of the crisis and replace aging applications with modern systems to reduce costs and streamline operations."

While IT unit costs have declined substantially over time, the total cost of IT has increased, as a result of burgeoning demand for IT resources - demand driven primarily by application inefficiency. Compass analyses of application environments in large organizations show that, on average, 80 to 85 percent of IT spending is devoted to managing and maintaining existing systems, leaving less than 20 percent of the budget for innovation.

Businesses have increasingly recognized the challenges posed by inefficient application environments. Few have taken action, however, as short-term demands to simply "keep the lights on" take precedence over the long-term benefits of rationalization. That is changing, Pacileo says, as forward-looking senior executives are using the current economic downturn to fundamentally reassess and transform their operations to enable greater agility and innovation in the future.

In one recent example, a large commercial bank replaced an outdated core banking system that required support of 127 interfaces to various solutions. As the bank outgrew the system's capabilities over the years, it simply added ancillary solutions without addressing the underlying problem. Recognizing that this stopgap approach was no longer viable, Compass recommended implementation of a new core banking solution that reduced the number of interfaces to 33 and allowed the IT team to focus on supporting business needs rather than repairing broken interfaces.

"We're witnessing the best opportunity since Y2K to address problems in how companies use business critical applications," says Pacileo. "Top performers are recognizing they can't run a 21st Century business on 20th Century technology. They're using the current slowdown to take actions that will provide a competitive advantage when the economy recovers."

Pacileo adds the window of opportunity will close rapidly when the economy recovers because other priorities will once again take precedence: "Businesses can't afford to put off application modernization until a bull market returns."

In an era of dramatic and increasingly rapid innovation and change, businesses that seize the opportunity to modernize their application environments now will gain a significant competitive edge. Those that fail to take action, meanwhile, will continue to fall further behind.

"Organizations that effectively rationalize their application portfolios reduce overall spend by 20 to 40 percent, enhance quality and organizational agility, and reallocate savings to implement more innovative and competitive solutions," says Pacileo.

About Compass

Compass (www.compassmc.com) is a global management consulting firm specializing in improving the IT and business operations of large enterprises. Compass' proprietary models and methodology of comparative analysis enable clients to achieve world-class operational performance, optimized sourcing, alignment between systems and business processes, enhanced process maturity, and maximum value from investment in information technology.