CIOs should do an in-depth analysis to find which major groups oractivities cost the most, and then find areas to cut in those places,she says. For example, if data storage is eating up a lot of funds,e-mail is often the culprit. By getting employees to clean out theire-mail boxes more often, CIOs could save 15 percent to 20 percent oftheir actual costs, Birge says.

After examining his spending, Robert Tolbert, vice president and CIOof Lyondell Chemical (2000 profit margin: 10.8 percent) saw thathardware and software were the major cost centers for his IT budget.Tolbert, who holds the same titles at Equistar Chemicals, a jointventure between Lyondell and Millennium Chemicals, says he is in theprocess of standardizing the desktop computers and software at each ofLyondell's and Equistar's 33 locations worldwide. Prior tostandardizing, Tolbert had to juggle more than 1,700 differentsoftware tools and four different operating systems. Upon completionof the project, he will oversee 400 applications and two operatingsystems. The project will enable him to slash maintenance costs onmultiple platforms and consolidate his resources into one centralizeddata center. This data center holds the resources to manageapproximately 8,000 desktop and laptop PCs all over theglobe.

"In tight times, you invest in projects that have a swift payback,"Tolbert says. "I wanted the desktops and software to be as similar aspossible so it was cheaper and there were fewer variables tosupport."

Budget constraints aside, CIOs know that it makes sense to spend moneyin IT and cut costs elsewhere in a business. Arrow Electronics' Settlerecently rolled out a new set of services on the company's websitethat lets customers view product availability and see how othercustomers are utilizing Arrow's products. The project ate a chunk ofhis budget but saved millions of dollars in call center and help deskcosts for the company.

Keeping all projects in line with business goals is essential forevery CIO, but it's particularly necessary when one's IT budget istightly constrained, says Tom Mangan, a partner in the technologyintegration services practice at Andersen, a management consultancy inAtlanta. "Every project must be business-focused, with the strongestbusiness case and a clear ROI so that every executive knows where eachIT dollar is going, and knows it's a business investment," Mangansays.