Reducing cost comes in three basic flavors.

Consolidation.

• Consolidate simple applications onto a dedicated Applications server. (These small applications have to be able to play well in a sandbox for this strategy to work).
• Consolidate physical servers onto a virtual server infrastructure.
• Consolidate applications. Eliminate similar applications used by various business groups and merge those users onto centralized, corporate systems.

Reduction of services

• Instead of backing up everything every day and sending tapes off-site, back up to disk (virtual tape) and only use tape backups and off-site storage for critical data for archiving.
• Reduce the number of hours the help desk is available.

Outsourcing

• Consider hiring an outside company to run some of your basic IT services. These companies have made the investment in infrastructure and systems necessary to manage IT. They leverage their infrastructure cost across multiple clients enabling them to provide the same services for less.

A Technology Roadmap is the best way to manage your technology. Most companies don’t plan for the next systems upgrade and then one day they hear their system is reaching “end of life”. That’s  when they scramble to get funding for a system upgrade. This same process repeats for every system in the company and becomes a continuous process. With a Technology Roadmap you plan which systems get upgrades, which systems get replaced, which new systems are to be implemented and when they will be done.  Funding is allocated in each year’s budget to implement each step of the roadmap.

IT spending comes in three basic areas. Managing these expenses effectively requires an IT Roadmap. See our article regarding IT Roadmaps for more information.

Here are the three basic areas for IT spending.

1. Upgrades to hardware and software. You can easily determine the refresh cycle of hardware and should incorporate refresh costs into your monthly IT budget. Software upgrades are a little more elusive but you can manage these costs with some careful planning. Find out from your software vendors when they expect to release their major upgrades and when they will stop supporting current versions. With this information you plan when you will upgrade the systems. You do this per your plan and not based on vendor release schedules.
2. Expanding capabilities; Security, monitoring, Internet usage, Disaster Recover, etc. Looking at future business needs you can determine which technologies you will introduce into your infrastructure and when. By planning for these capabilities you can ensure they are funded in your technology budgets each year.
3. Business growth needs: Disaster Recovery, Business Acquisitions and Capacity Growth are a few examples. Again, these need to be planned for in advance and incorporated into your Technology Roadmap where possible.

This is a difficult question to answer as systems and solutions along with vendors are so diverse. Here are some things to help you make an informed decision.

• Ask the vendor for White Papers that outline how a company similar to yours implement the solution and what benefits they obtained. Cost savings, productivity improvements, increased business, etc.
• Ask the vendor to provide a trial system to test with. Getting the device in house where staff can set it up and perform internal testing can validate the vendor claims or convince you this system is not for you. If you choose to keep the system, you pay the vendor within the pre-determined terms.
• Ask the vendor for referral clients that you can call and talk to about their experience with the system/solution, implementation process and vendor support
• Some vendors will provide a “proof of concept” at their facility where they will set up a system in house and allow your technical staff to come in and work with the product.
• Ask for a meeting between your technical team and the vendor’s technical team to discuss your concerns. At these meetings many details emerge that clarify marketing statements to the actual capabilities of the products/services.

IT needs to take a fresh look at the objectives behind cost cutting. Too many organizations look to cut expenses by cutting staff, especially in cost centers such as IT. The key here is to transform your IT from a cost center to a “revenue generating” partner of the business units. Look at what services your IT provides and what value those services are providing. Is there a cheaper way to provide that value by outsourcing all or part of it? Can you stop providing some services that provide minimal value? After you’ve identified your opportunities to free up resources/costs, talk to your business units and identify opportunities to help them generate additional revenue by implementing the right technologies. The idea is not to cut your IT staff but reallocate staff so they are helping generate revenue instead of being an expense. For more information on cutting costs please reference the following Feature article on this blog site

Cutting IT Budgets By $7 Million

Start with your Business Plan and determine what your present needs are and what your future needs will be over the next 5 years. Assess what systems need to be replaced and which need to be expanded to support future growth. Take all these elements and develop your five year Technology Plan. From there you develop a Technology Roadmap which defines your IT budget/spending priorities for the next five years.

Can’t afford and wont afford are two different things. If your business could not sustain a catastrophic event then you have no choice but to build into your cost structure a disaster recovery solution. The good news is that with today’s technology, there are a variety of options to what a DR solution can look like…and cost. Instead of the traditional DR solutions where dedicated sites and infrastructure are waiting to be used, new DR solutions can mirror sites or at minimum, load balance sites. By mirroring data (site clustering) you have a replica at a secondary site. With virtualization and SAN technology this becomes a viable option. Additionally, load balancing sites is also an option often overlooked.

Technology project failures can be caused by many reasons, often from a combination of reasons. Here’s a list of root causes for technology projects failing.

• Network limitations
• Security constraints
• Systems incompatibility
• Inadequate Technical Infrastructure
• Incomplete solution
• Poor Project Management
• Data Migration challenges
• Conversion challenges
• Limited in-house knowledge
• Limited staffing resources
• Operational issues
• Lack of Leadership commitment

As you can see this is a broad topic so we’ve created a great resource with our free e-Book available on our web site.

How do you cut $7 Million from your IT budget? The same way you eat an elephant, one bite at a time. After 20 years of helping companies manage their Infrastructure Technology (IT), I’ve seen too many companies go into paralysis when faced with major cost cutting opportunities. Most will tackle the low hanging fruit, but once that’s achieved and only the “large effort” cost savings opportunities remain, paralysis sets in. I’d like to challenge businesses to take a long-term approach to cost reductions instead of the quick and dirty cost cutting I see so often. By taking a long term approach you are able to injects controls over technology spending and ensures maximum returns on your IT dollars.

Let’s look at a real life example of how this can be done using server consolidations as our example. The low hanging fruit many companies embrace is to consolidate servers using two basic strategies. Consolidating small applications onto single, departmental servers without implementing any type of virtualization. (Yes, some small applications will play nicely on shared departmental servers). The second strategy is to implement virtualization where high-end servers are deployed and software is installed on them allowing the hardware to be carved out into smaller “virtual” servers. This enables one large server to be used more efficiently than several small servers. Each virtual server configuration is allocated based on application demand instead of hardware configurations established by server vendors. Both of these approaches can be done with relative simplicity and minimal effort resulting in tremendous cost savings.

There is a third consolidation strategy that is where most companies experience paralysis. It is the most complex and the most avoided approach to consolidation; that is Application Rationalization. Many companies have grown through mergers and acquisitions, others companies have operated for eons without a centralized IT department and consequently many businesses operate duplicate or “like” applications throughout their enterprise. Take a look around your organization and see if you have two or more of these types of applications running;

• Financial applications – Are different business units or remote sites using their own financial applications?
• Document Tracking (Imaging) systems – Do you have Engineering units at different locations using different vendor’s products to develop and track their Engineering documents?
• Manufacturing systems – Do you have more than one manufacturing site and do they use corporate “Enterprise class” systems or do they have their own flavors?
• Time Clock systems – Do you have different time-clock systems at various sites?

The cost and effort to consolidate (or rationalize) applications can be overwhelming. This is where I see companies freeze up like someone staring at their elephant dinner. The typical response I get from IT is “this is going to take years and I don’t have the staff or funding to tackle this large an undertaking”. Wrong! This is where a long-term view comes in to play. A project of this magnitude is done in phases… one bite at a time!

Here are the simple steps to develop your 5 year plan to eliminate excess costs from running duplicate systems in your enterprise.

1. Determine priorities – Pick one application to start with. Identify which application will support your company’s business objectives the most and start there.
2. Develop the budget – Determine what this consolidation project will cost in terms of hardware upgrades, software upgrades, network upgrades and temporary staffing, vendor and/or consulting fees.
3. Determine the return on investment – How much will your company save over the life of the systems. This should be actual dollars in terms of hardware, software, vendor support fees, consultant fees for upgrades, etc over the lifecycle of the system and compare these costs with the projected costs of operating in a consolidated environment. Be sure to compare the additional costs for the enterprise system to support the additional users with the cost of duplicate systems.
4. Formally request funding to leadership – Present the recommendation to Sr. Leadership for funding in next years budget.

When you’re done with steps one through four, repeat the process starting at step one again. Pick the next application to consolidate and go through the same process for the second application. Depending on the size of your organization and the size of the project budgets, senior leadership may choose to fund more than one project at a time.

You now have “year one” of your multi-year plan complete!

Now go back through steps one through four of the remaining environments where you have duplicate applications and develop the rest of your multi-year plan.

There is no reason for companies to live with excessive costs associated with running duplicate applications. There’s also no reason to be frozen by paralysis gaping at the size of their opportunities. By taking a long-term view of technology spending, companies can take their first bite out of their elephant budgets and begin their journey to cost reductions and technology efficiency.