Five More Ways to Cut Costs Without Cutting Services

By Jeff Vance

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Last month I wrote about five ways your organization could cut costs without cutting services. While that article offered advice on embracing data center automation, exploring open-source software and eliminating duplicate software, there were several other ideas that didn’t fit into that story.

Here, then, are five more ways to cut costs without cutting services:

1. Examine Wireless - If you have a mobile workforce, you may be spending too much on wireless. The Yankee Group’s CIO Guide to Cost Cutting series of studies found that many organizations have a piece meal approach to wireless. Different individuals or business groups adopt their own plans, and, as a result, organizations have little control and spend more than they should.

The report looked specifically at SMBs and found that a 125-person organization can save simply by stopping the practice of reimbursing individuals for their cell phone use. Instead, the organization should sign up for a corporate plan with an “enterprise-savvy carrier,” a switch that translates into roughly $100,000 in savings. That $100,000 is the savings per year, with the upfront migration and implementation costs totaling less than $15,000.

As dual-mode phones and plans become available, organizations can save even more money by adding a WiFi component to their cellular plans. In the U.S., only T-Mobile currently offers a true dual-mode plan that allows users to offload mobile calls onto WLANs, although that may change if consumer demand grows.

Picking wireless networks over traditional cabled ones is another cost-cutting wireless option. Gold Key/PHR Hotels and Resorts manages hotels, restaurants, resorts and time-share properties in the Virginia Beach, VA area. For site-to-site communications Gold Key currently relies on costly T1 lines.

“We’re in the process of deploying Motorola wireless bridges to replace our T1s,” said Phillip Prestipino, telecom engineer at Gold Key. With a range of seven miles and no need for line-of-sight, the wireless bridges can connect every property they manage. When the Motorola deployment is completed, Gold Key will migrate to VoIP and Prestipino estimates that they’ll achieve ROI in 20 months. After that they’ll continue to save a minimum of $1,000 per month per property versus T1 lines, adding up to more $100,000 per year.

2. Get in the Cloud - Cloud computing has moved beyond the hype phase. Sure, there’s still skepticism out there, and vendors are treating cloud as some sort of magic bullet, but there are plenty of applications ready to migrate to the cloud that can save you money today. The most obvious is email. Google has put together some compelling numbers about outsourcing email. Versus hosting Exchange in house, Google’s enterprise-class email offers the same feature set as Exchange at a much lower price. According to Rajen Sheth, senior product manager for Google Apps, switching to Google can cut the typical cost of email from $250-$300 per user, per year to $50 per user, per year. Before you dismiss Sheth’s number as biased, he’s backed up by a recent Yankee Group study. Yankee argues that a 75-person SMB will save nearly $70,000 per year switching from in-house email and messaging to a cloud-based solution like Google’s.

“As your organization moves more services to the cloud, you have the opportunity to look for other cost savings,” said Jeffrey Breen, CTO, Yankee Group. Hardware costs should go down as you outsource server management and maintenance. “You may also end up purchasing cheaper equipment, such as netbooks instead of laptops,” he said.

Cloud computing does have its drawbacks, especially in terms of security and compliance, but Breen believes that third-party providers will tackle these problems as the space evolves.

3. Haggle - How much of your IT budget do you consider locked in? If you think of ongoing service and licensing contracts as fixed costs, you’re probably spending more than you should. “Vendors are definitely more willing to deal now,” said Marc Snyder, managing director, IT advisory practice, KPMG. “Consider your options and work with them to trim costs.”

Snyder said that it’s important to do your research and have alternatives lined up. Don’t simply ask vendors to cut their prices. Knowing your options helps you negotiate from a position of strength.

Carolina Advanced Digital (CAD), an engineering company that provides IT infrastructure, security and management solutions, recommends that its customers switch to HP ProCurve and away from other networking solutions from vendors like Cisco. “HP ProCurve products come standard with free lifetime firmware updates and free lifetime warranties, maintenance and support, including next-business-day replacement or repair,” wrote Sarah Burris, marketing manager, CAD, in an email for this article. “The difference in support costs alone has saved our customers more than $100,000, not to mention the cost of ownership advantage and strong ROI.”

4. Go Green - Talk of Green IT usually turns back to something covered in my first story about cutting IT costs: virtualization. “If you still have each server tied to an individual application, you’re probably seeing, to be charitable, a 20% utilization rate,” said KPMG’s Snyder.

According to Snyder, server consolidation through virtualization is a good first step on the path to Green IT, although you should also start working with outside entities, such as utilities (more on that later). Breen at the Yankee Group cautioned that you need to have a sense of purpose before starting a Green IT initiative. “What does Green IT mean for your organization?” he asked. “Is Green IT just a bunch of signs and a feel-good story for your employees? If so, don’t invest. If you can actually save on electricity, cooling, floor space, etc., then do it. However, you need to demonstrate ROI.”

According to a report by IDC commissioned by Redemtech, a provider of corporate computer recycling and reuse services, Green IT efforts should go well beyond simple power reductions. Companies should study the entire equipment lifecycle, from how a piece of hardware was produced on through to its environmental impact when disposed. The study, Beyond Power: IT’s Roadmap to Sustainable Computing, advises organizations to first develop best practices for sustainability, rather than approaching sustainability in a piecemeal fashion, which is common today.

Other advice includes extending the equipment replacement cycle, often by redeploying equipment to other departments that could still benefit from it; choosing equipment designed to be recyclable; refurbishing equipment in the middle of its lifecycle to help extend its life; and seeking alternatives to disposal, such as donating used equipment to charities.

5. Found Money - A benefit of that final piece of Green IT advice, donation, has the added benefit of providing a tax write-off. I asked Snyder of KPMG what he has seen to be the most common mistake companies make when cutting IT costs. “Leaving money on the table,” he said.

“Are their tax write-offs, tax incentives or even utility-sponsored incentives that you qualify for?” For instance, PG&E in California will subsidize virtualization efforts subsidize virtualization efforts.

Many utilities give incentives when organizations agree to cut back on power usage during peak usage times. This can be as simple as turning out every other row of lights. Visit the Database of State Incentives for Renewables & Efficiency to see what’s available in your area.

Gold Key's Prestipino mentioned that his company is exploring these sorts of incentives, while also pursuing other state-sponsored ones. In Virginia, companies can get incentives for allowing workers to spend part of the week working from home.

Jeff Vance is the president of Sandstorm Media, a writing and marketing services firm focused on emerging technologies. If you have ideas for future stories, contact him at jeff@sandstormmedia.net or visit www.sandstormmedia.net.