5 Ways to Cut Costs Without Cutting Services

By Jeff Vance

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When an IT manager gets the order to “do more with less,” a shiver runs down the spine. IT managers know that this usually translates into doing less with less and finding ways to hide that fact. Compounding the problem is IT has been in cost-cutting, efficiency-boosting mode for several years now.

Haven't we squeezed every last ounce of efficiency out of IT? When I started researching this story, that’s the questions I wanted to answer.

I posted a request for sources on the website Help A Reporter Out, and I wasn’t expecting much. I figured I’d get the usual suspects, virtualization, SaaS and outsourcing, and little else.

Was I in for a surprise. Sure, I received plenty of emails about virtualization and SaaS. However, the 100+ responses suggested plenty of other cost-cutting strategies; everything from replacing dark fiber with wireless to actually cutting back on service levels, especially if those services, such as 24/7 help-desk availability, aren’t mission critical.

Culled from input from 100+ IT pros, here are five ways to trim IT costs without cutting services. A few ideas are along the lines of what you’ve heard before, such as data-center automation, but even in these categories, we’ve learned of some tricks that you may not have thought of.

1. Embrace Automation

It’s no secret that virtualization is one of the bright spots in this recession. According to a recent survey by Robert Half Technology, 40% of CIOs plan to invest in virtualization this year. Data center automation in general (be it automated application discovery or consolidated event management or change and configuration management) is also holding up strong, mainly because it too promises to cut costs by eliminating cumbersome manual tasks and boosting efficiency.

Automation isn’t limited to the data center, though. VDI (virtual desktop infrastructure) can drastically reduce the cost of managing employee desktops, and some organizations are taking a closer look at a range of “manual tasks” and finding plenty of room for automation throughout the enterprise.

A case in point is the New York Office of Temporary and Disability Assistance (OTDA). OTDA is responsible for most types of assistance that New York citizens can receive, from food stamps to heating assistance to housing to disability benefits. Until a year ago, anyone applying for assistance had to visit an OTDA office in-person, where an agent would fill out paperwork and enroll them in the program. Making a cumbersome process even more arduous, various offices handled various types of assistance, meaning that person would have to go to one office for food stamps another for heating assistance and still another for disability services.

Clearly, this wasn’t a cost-effective way to provide these services. In May 2008, OTDA launched the Web portal MyBenefits, allowing citizens to apply for a range of assistance online. Even with the website in place, though, service costs were still high. Each help desk call cost the state about $25. With approximately 62,500 people accessing the site each month, and about 10% of those calling for help, usually because of a service interruption, costs for the help desk alone were more than $150,000 per month.

Using monitoring tools from Precise and Symantec, OTDA was able to pinpoint problems and trim these costs. “We were able to identify a number of application and system errors that could have led to a surge in help desk calls,” said Daniel Chan, CIO of OTDA. “With better monitoring and benchmarks, we’re now able to find and fix problems before outages occur.”

2. Open Source

Okay, switching to open source is a pretty obvious cost saver. However, many organizations worry that whatever they save in reduced licensing costs will simply be shifted to training and support.

“A few of our clients plan to switch from enterprise systems to open source, perhaps just for a year or two, as a way to ride out the recession,” said Barbara Gomolski, an analyst with Gartner. She noted that those make the switch tend to be mid-sized companies. “It’s not Fortune 500 companies doing this.”

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.