Logica is cutting 1,300 jobs as it tackles the consequences of slow European growth due to the downturn. Lower than expected profitability of some of its longer term contracts is making an impact on the business. It has recently become clear that many of its clients are delaying short term expenditure and reducing discretionary investments to weather an uncertain economic future.

Logica said it would be incurring a one-off charge of £39m in 2011 to cover the expected lifetime contract losses as a result of the likelihood of lower expected revenue on a small number of volume-dependent contracts with between four to six years still to run.

According to a survey conducted on behalf of software supplier BMC, the majority of European organisations that have cut cost from IT operations are reinvesting those funds into strategic IT projects. The survey of 300 European IT decision makers found that 60% were reinvesting their cost savings strategically. This makes a lot of sense as strategic projects can pay dividends in helping businesses grow when economic conditions improve. While those businesses that just save money without reinvestment could lag behind when recovery begins. Every organisation is different and what they choose to do with their savings will depend on a number of factors. Reinvestment is one option. But so too is reducing IT costs such as software or hardware maintenance in order to use the savings to save jobs. Mark Bartrick, Managing Director of Silver Bullet Associates says “cutting IT costs is not hard; simply negotiate better deals with your IT suppliers”.