Get the Most out of IT Investments

Want to spend IT dollars more prudently? Here’s how.

According to a survey conducted by Computer Economics, 63 percent of surveyed organizations expect their information technology (IT) budgets to stay the same from 2008 to 2009. 25 percent expect to spend less, and 12 percent expect to spend a bit more. Those projections were garnered in the fall of 2008 and may be viewed as optimistic given current economic realities. To provide some perspective, the following chart contains the levels of IT spending by industry for 2008.

Where are organizations spending their money? According to benchmark data, 21 percent of the budget is spent on hardware/network support and services, 21 percent on software licenses and support, 12 percent on outsourcing/consulting, 42 percent on staffing, and 4 percent on other expenses.

Although most of us recognize technology as an investment, we typically don’t think of it as an area where we can actually save money (without affecting service). However, each of the following areas of technology expense offers organizations cost-saving opportunities. 

Hardware

When it comes to hardware, consider consolidating with a single vendor and/or service provider. This can yield significant discounts and reduce administrative efforts. You may want to extend warranties at the time of purchase, especially for workstations and other end-user devices. Most warranties are for three years, yet most businesses keep their equipment for at least five; two-year extensions will save these businesses significantly if purchased early.

In addition, if equipment is under maintenance but nearing the end of its life cycle, consider dropping the maintenance and opting instead for a time and materials basis support agreement. Consider third parties for maintenance and support versus the manufacturer, and solicit competitive bids for these services. Finally, consider virtualization. Many businesses purchase a variety of servers (for the web, for mail, etc.) individually; instead, consider buying one server and allocating the processing to perform multiple functions. This can also be done with disk storage with storage area networks. 

Network

It’s a good idea to solicit competitive bids fairly regularly — at least every two years for your telecommunications and network services. Consider obtaining quotes not only from communication carriers but also authorized resellers/third parties. Consider examining your circuit utilization to see if you need as much as you’ve got and to determine if you actually have what you’re paying for. This is particularly important if you’ve had changes in your requirements over the term of the agreement. In addition, look into Voice Over Internet Protocol (VoIP), which affords organizations a consolidated network with a single circuit for data and voice services. Finally, be mindful of expired services. In the past, you may have had a variety of fax lines, or switched to PC fax, but are still paying for those now obsolete fax lines. 

Software

When it comes to software, duplication is your enemy. Oftentimes, organizations will have multiple word processing products, mail systems, applications systems — you get the idea. Sticking with one, organization-wide system is the cost-effective way to go. Oftentimes, businesses may find themselves with unnecessary software licenses as well, especially if they’ve undergone any kind of staff or organizational consolidation. For example, you may have purchased 500 licenses for 500 staff members five years ago, yet today you only have 350 staff. License inventory is key.

In addition, beware of unused products and modules. For example, a business may have purchased an ERP system with 17 modules but is only using 10 of them; you don’t have to pay maintenance for those unused seven modules. Make sure you retire unnecessary software applications; if you only have two people in your organization still using outdated software, retire it and move them to what the rest of the organization is using. Finally, consider bundling your hardware and software purchases through a third-party supplier; oftentimes they’ll even load the software onto the equipment so you and your staff can get right to work. 

Consulting/Outsourcing

Consider competitively bidding on agreements or renegotiating current agreements to be in line with market conditions. Assess the need for extended service contracts. A lot of clients initiate agreements to accommodate a certain work schedule, say seven days a week and 24 hours per day. However, business requirements can change, and that level of coverage may no longer be necessary. Don’t pay a premium for something you don’t need. Impose measurable service level agreements (SLAs) and financial recourse if the provider doesn’t meet SLAs. Look to smaller, hungrier firms, and you may get better pricing and service options. 

Staffing

With staffing, the equation is simple: get the right people with the right skills to do the right things. Is your staff complement appropriate, or do your staff members outnumber your needs? Consider third-party vendors for workstation maintenance or hardware repair. Consider outsourcing other functions, such as your workstation, server, or telecommunications support services where you may not have a full-time need. 

Other

“Other” typically encompasses supplies and training. The best way to cut supply costs is to centralize all IT purchases and make one person accountable for them. Oftentimes too many staff members handle these purchases, and they aren’t made prudently with qualified vendors.

Training should likewise be managed cost-effectively. Look into online, computer-based training versus sending staff to costly off-site seminars. If staff do need to attend external training, try to ensure it’s held locally, and make them accountable for the information they’re learning so they may return to the organization and train others. 

In Conclusion

There are a variety of ways to save valuable IT dollars. Interestingly, one of our best practices—virtualization of hardware, networks, and staff — appears to be taking off. Many organizations will be evaluating it in 2009.