5 Ways to Cut IT Costs Without Cutting Deliverables

Dec 30, 2008

Robert McGarvey

Cutting IT budgets may not be easy, but when you know where to slice, the savings can add up. Here are some tips from six experts on how it can be done:

  • Do an inventory. Just maybe the biggest IT savings come from “cleaning out the closet,” says Peter S. Greis, principal, IT Planning & Management, Capgemini Financial Services Strategic Business Unit.

    “The first step in saving money is to understand what you really have,” he says. According to Greis, it’s shockingly common for Capgemini to do an IT portfolio review –- as Greis calls this intensive review of a company’s existing IT infrastructure –- where it discovers that “1,000 applications are in use enterprisewide, but they only need 100. There’s often considerable waste. That is why we say the first step is: Understand what you have.”

    Cuts that nobody will notice will immediately present themselves, he says. “Portfolio rationalization is, in our experience, the biggest opportunity for real cost savings in any IT operation.”

  • Go “good enough.” That’s what Rene Bonvanie, senior VP and head of IT for Redwood City, Calif. application developer Serena Software, says is his mantra for spearheading broad cost controls in his company’s IT budget. He points to a recent decision to switch to GMail.

    “We are saving $750,000 a year by moving from Microsoft Exchange,” says Bonvanie, who indicates the switch will involve all of the companies 850 global employees. Is GMail as robust and versatile as Exchange or Microsoft Outlook? Bonvanie says the question misses the point.

    “GMail may not have all the features, but it is good enough and, for now, that is our criterion,” he says. “We won’t be spending more for features we don’t need.”

    Chew on that: If “good enough” is the signpost, does a company need to upgrade from XP or go from Office 2003 to 2007, to pick two glaring examples? Bonvanie says no and, at Serena, unless an employee can demonstrate a vivid need to go with Microsoft’s latest, they will keep using what they already have because –- to repeat –- “it’s good enough.”

  • Offshore more. That’s what Hackett Group senior research director Erik Dorr says his clients tell him they will be doing -– and, says Dorr, the pace of new offshoring initiatives will be brisk.

    Right now, the surveyed companies say they are offshoring around 15 percent of their IT labor –- but Dorr says that will jump to 26 percent within two years. Bigger, more complex projects probably soon will be winding down in Dallas and Chicago and moving to Bangalore and Beijing, says Dorr.

    “We have seen what we can only call a dramatic increase in offshoring -– the pace is really accelerating,” he says. A strengthening dollar vis a vis the Indian rupee is making the savings look even more attractive, Dorr adds.

  • Automate more IT tasks. What if your organization had a widget, a barebones instructional set, that every night at midnight turned off all IP telephones, every WLAN access point, maybe every scanner and photocopier? Multiply that over hundreds, possibly tens of thousands of devices and, instantly, the savings add up to real money, says Doug Murray, VP and GM of Volume Products Group at Extreme Networks in Santa Clara, Calif.

    A study of IP phones that are shut off at 5 p.m. and turned on at 9 a.m. showed network costs dropped a staggering 75 percent, per Murray, who indicates he sees a trend where more companies deploy more widgets to cut energy use and network costs.

    Automation also can lead to need for less staff, says Sharon Chang, HP's senior product marketing manager for server automation, who explains that automating routine chores such as pushing out Windows patches to all networked computers -– rather than doing this ad hoc, computer by computer -– can have significant impact on staffing needs. In a company where there is one admin to every 35 users, automation of simple tasks can alter the ratio to 1 to 100.

    “That frees up IT staff to do a lot more work that will make a difference for the organization,” says Chang.

  • Stay flexible, urges IT consultant Steve Jenkins of the Lyndon Group -– that’s how to avoid getting locked into expensive and even unnecessary projects.

    His advice is to divide projects into small units -– deliverable in, say, 60- or 90-day timeframes -– and keep alert to the need to alter course at those same intervals.

    “IT, acting in isolation, sometimes gets a reputation for going off on tangents that aren’t meaningful to the business,” Jenkins says.

    The way to stay on a focused course, he stresses, is to view every project as consisting of tiny, deliverable steps -– and to maintain close contacts with end-users. Do they still need what they said they needed nine months ago? Do the goals need to be tweaked? Keep up a steady examination of just those types of questions, says Jenkins, and this is a prime way for IT to win a reputation for a flexible focus on end results that matter to the enterprise.

  • Tags: Windows, services, HP, CIO, IT budgets,

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