IT is always charged with containing costs but the pressure to do so has increased since the recession. The trouble is that most of the obvious IT costs have long since been pared to the bone, leaving many a CIO stymied over what to do next.
The good news is that there are still quite a few places where costs can be curbed relatively easily. You just need to know where to look.
Usually, the highest cost factors are found in the most commonly overlooked areas of IT.
“IT departments devote approximately 75% of their budgets to the maintenance of the existing enterprise infrastructure,” explains Paul Liu, CIO at Freeborders, a global information technology services and consulting company. “One of the hidden costs is that infrastructure management can tie up 50% of an IT organization’s personnel in large enterprises.”
Certainly one answer to curbing those costs is outsourcing, but even outsourcing won’t pare all the fat from the meat. Here are five tips to cutting costs without sacrificing your IT operations.
Ditch Unnecessary Software Licenses
According to a 2010 IDC survey of mid-sized and large businesses, over half of enterprise applications are underutilized with anywhere from 25% to more than 75% of licenses paid for but unused. Licenses are expensive, so this can translate to thousands or even millions of wasted dollars. Collected data from a license review can be used to negotiate pay-per-use agreements and prevent renewed leases on unused/underutilized software and hardware assets.
According to OpeniT, a provider of IT asset metering and optimization solutions, by tracking software purchased against what is actually used, and applying this information to vendor contract negotiations, most companies can cut their software ownership by at least 25%.
Be sure to also guard against costly licensing issues springing from virtualization. They can violate software license agreements and create a compliance nightmare that can cost millions.
Evaluate open source alternatives to expensive proprietary software to cut licensing fees further.
Reduce Virtualized Server Sprawl
“Though the efficiency and cost-savings potential of virtualization is significant, waste is waste – even in a virtual environment,” explains Sumir Karayi, CEO of global IT efficiency leader 1E.
Enterprises increasingly embraced virtualization in 2010 – particularly in the form of server virtualization. “But often the ease and low cost of spinning up a virtual server created a false sense of cost savings,” Karayi says. This year, virtual server sprawl will become a growing challenge for organizations trying to harness the power, flexibility, and savings of virtual environments.
“IT executives need to address the most fundamental issues associated with server consolidation and virtualization: How to identify which servers can and should be reallocated or decommissioned, and how to determine which of the remaining systems should be virtualized,” adds Karayi. “It will become increasingly important for IT executives to create a visual representation of virtual server sprawl to better control the problem, eliminate waste, and realize the greatest possible benefit and ROI from their server virtualization initiatives.”
Kill Orphan Projects
“I keep running into the same issue in IT departments: projects that are no longer needed,” bemoans Dr. Jim Anderson, a business communications expert at Blue Elephant Consulting.
Massive amount of capital, time, and effort are wasted on IT projects that were launched last year by management that may no longer be on board at the company or who have moved on to other assignments within the company, Anderson points out.
“Simply because IT has a habit of putting our heads down and doing the work once it has been assigned, we often don’t think to check to see if it is still needed,” Anderson adds. “Things change but IT teams will keep pushing on to deliver a project long after the need for the project has gone away.”
Recoup Lost Service Credits
“Revisit every vendor contract,” advises John Baschab, senior vice president of Management Services at Technisource, one of the industry's largest tech services firms in the US. “Surveys show that the majority of these are rarely revisited after the initial negotiation, resulting in potentially missed service levels and service credits.” You can save big by recouping service credits and keeping routine maintenance on hardware up-to-date.
Spend Money on New Hardware
“It may sound counter-intuitive, but the total cost of ownership of a computer under someone's desk includes not only the cost of the machine, but the cost to power it and cool the heat it generates,” explains Eric Loyd, president and CTO of Bitnetix, a consulting and outsourced IT management firm specializing in small business and non-profit organizations. “Add monitors, external devices, and larger server class machines to the mix, and the power costs for running machines can get quite high.”
New hardware can cut energy costs by half or more. “This is more than saving money; it’s ‘going green,’” says Loyd.
Arguably, the biggest key to finding and reducing hidden costs is to train yourself to view the entire IT set-up anew. By shedding the blinders of familiarity, you can once again see line items in fresh detail. Once you see the money leaks, it is relatively simple to figure how to plug them.