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5 Ways to Cut Costs Without Cutting Services - Page 2

Jun 19, 2009
By

Jeff Vance






OTDA fits the bill here as well. “We’re in the process of sun-setting commercial software,” Chan said. “And we’re already saving $700,000 per year.”

Chan pointed out a hidden cost of commercial software: specialized software consultants. “Commercial software is highly proprietary, which means that you have to hire people with that specialized knowledge. Of course, you pay a premium for that knowledge.”

If you do switch to open-source software, be sure it’s a mature product. According to J. Schwan, managing partner, Solstice Consulting, you should choose an open-source project based not on its feature set, but on how strong the community is behind it. Projects with a strong ecosystem offer better support and service options and have been proven by a large user base.


3. Layoffs

During tough times, many organizations find that the easiest way to cut costs is to reduce head count. That strategy can backfire, though, since the short-term cost savings often turn into higher labor costs down the road.

“Retention is a good way to reduce costs. It can be hard to do in a recession, but you should do what you can to retain your workforce,” said John Longwell, director of Research at Computer Economics, an IT management research firm.

Layoffs can have hidden costs. Employees don’t feel nearly as loyal after layoffs, and many will start looking for jobs elsewhere when the economy improves.

“Employees fearing job loss will certainly do their best to be productive,” Longwell said. “But the fear only motivates them so long as times are bad. When economy turns around, if your organization is perceived as treating workers poorly or unfairly, they’ll leave at the first signs of a recovery.”

Acquiring labor will then be more expensive, even if you hire back those you’ve let go. In the meantime, when people are worrying more about keeping their jobs than doing them productivity goes down, and if the work load stays relatively the same, quality will suffer because the remaining employees are overtaxed.

Alternatives to layoffs include switching to four-day weeks, which is happening mainly in the government sector, or embracing telecommuting, which is more suited to the private sector. Organizations can also replace workers who leave or retire with contract employees to keep costs down until the recovery.

4. Eliminate Duplicates

Believe it or not, even in relatively lean organizations, there are still plenty of duplicate systems out there. Often, organizations will purchase a bulked-up enterprise software suite that contains, say, a BI feature. Since they didn’t purchase the suite with BI in mind, they go out and purchase a separate BI suite.

Other companies pay too much for software they use sparingly. Bimba Manufacturing Company of Monee, Illinois found that they were overpaying for their ERP package because the company, which manufactures pneumatic equipment, had too many ERP licenses when very few employees actually used the software. While many people accessed it, most were only checking on very specific and limited information that didn’t need to be walled off in the ERP system.

Bimba moved that information into a separate database, developed some simple Web apps and saved plenty of money in the process. The company wouldn’t reveal exact figures, but said they “experienced six-figure savings.”

5. Cut Services

I know, the title of this article promises to discuss cutting costs without cutting services, but that may be a wrong-headed approach. “Are there opportunities to reduce service levels without impacting operations?” Gartner's Gomolski asked. “Do you really need to have help-desk availability in the middle of the night? Would it hurt to extend the turn-around time on a work order from 12 hours to a couple of days?”

If you trim excess services properly, the cuts may not even be noticed by end users. “You have to be careful about this,” Gomolski said. “Pay attention to the flow of your business. If you’re always busy in the early morning, be aware of that and be sure that whatever you cut doesn’t come into conflict with your organization’s work flows.”

Jeff Vance is a freelance writer and the founder of Sandstorm Media, a writing and marketing services firm focused on emerging technology trends. If you have ideas for future stories, contact him at jeff@sandstormmedia.net.

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