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 NEWSCutting costs By Loretta W. Prencipe and Stephanie Sanborn September 28, 2001 1:01 pm PT With more uncertain economic times ahead, the call from executive suites to save money is bound to grow louder.
"Quarter over quarter, you're going to show some improvement by reducing costs through management techniques, but you're not going to be able to do that forever," says Lazarus, adding that technology changes must be taken into consideration as well, because they can result in both short-and long-term savings. Stretching the IT dollar in the short term can be a bit tricky. These tips serve as a basic starting point for quick ways to save some cash -- and may also spark some new ideas for IT managers. HARDWARE 1. Fix software before buying new equipment Don't automatically buy more hardware to meet increasing capacity needs, says David Yakimischak, CTO of New York-based Medscape. Instead, Yakimischak suggests running a stress test. "Fix the software instead of buying more hardware," he says. The stress test will uncover system weak spots, such as an improperly indexed database or inefficiencies between two layers of a network. "If you're not doing regular performance analysis, the performance gain is outstanding," he says. Yakimischak, a member of the InfoWorld CTO Advisory Council, says that the average series of vendor-conducted stress tests and fixes for a small to midsize company can take from one to three months and cost $10,000 in vendor fees. But, he says, "You can anticipate savings of up to $200,000 on hardware." IT managers should also take a look at their storage needs compared to existing capabilities, hunting down unused storage before buying new appliances, Office.com's Lazarus says. Plus, analyzing available processing power can uncover situations where high-end machines are hosting low-end applications; reallocating that power makes systems run more efficiently and may negate the need for more spending. 2. Put off purchases and/or buy used "Not every piece of equipment has to be new," says Bart Stanco. The CIO of Stamford, Conn.-based Gartner buys warrantied telecom, network, and computer hardware from the secondary market. "You can cut costs from 30 [percent] to 35 percent," he says. Stanco does suggest, however, buying from established resellers -- and from those that are certified by industry organizations -- when appropriate. 3. Get a handle on software licensing With the ebb and flow of corporate personnel and the retirement and upgrade of PCs and laptops, Stanco says that many organizations end up paying more in licensing fees than they should. "Ideally you want an automated electronic asset management system [EAMS] to track software on the desktop to see what's truly being used," he says. Although an EAMS can be costly, Gartner's CIO says the investment can be worth it. With an EAMS or a full-blown software license audit, "you'll find that software is not deployed where you thought it was. [An EAMS] can also decrease time spent with handling new software distribution," Stanco says. PROJECTS 4. Prioritize projects Project needs and scope change frequently -- and often without the sponsor notifying the IT department. Medscape's Yakimischak has an easy way to discover which projects can be rescoped or even shut down. "Write down your project list from memory," he says. Those that you can't recall might not be all that important, he says. The next step, according to Medscape's CTO, is to have a sit-down with the project sponsor. "Don't say, 'We want to kill the project.' Ask, 'What's the business impact if we postpone the project until next year?' " he says. "You may find that you really don't need the project or find that you only need to deliver two pieces instead of eight." Office.com's Lazarus says that going over other departments' request lists and offering options can also help scale back project needs. "Just because a department tells you they don't want certain things right now doesn't mean they're not going to ask for those things later. You have to find out their priorities," he explains. 5. Deploy desktop support on scheduled intervals "Organizations have a tendency to reorganize frequently," says Kevin Volpe, group vice president of business operations at Gartner. By putting in business rules surrounding workspace moves, the enterprise can save money and resources. At Gartner, departmental and workspace moves are done only in certain intervals and at certain times. This, Volpe says, lowers the transaction costs associated with the moves. "If you have several personnel moves spread out over a week and take that same number of moves as one big move, you will save hours in planning, execution, and expenses associated with outside vendors," he says. PERSONNEL 6. Convert long-term contractors to permanent employees "In the past 12 months, we had a burst of contracting," Yakimischak says. To find the break point on contractor vs. employee status, he pulled an "aging report" on his tech temp staff of 40. The CTO reviewed contractor status by hours per week and length on the job -- paying close attention to an important knowledge base: the software engineering staff. Yakimischak moved four full-time long-term contractors to permanent-employee status, saving the company some $300,000 annually on the difference between contractor's rates and employee salary and benefits. 7. Examine redundancies Office.com's Lazarus offers the example of around-the-clock monitoring done by an automated system but also with a staff member physically on-site to keep an eye on things. A business can save money by eliminating one redundancy -- often cutting back on personnel and leaving the automated technology in place. But they must be aware of the trade-off they're making. VENDORS 8. Rethink maintenance contracts re-ups Before renewing maintenance contracts, Gartner's Volpe says, conduct a two-part analysis: run-rate and equipment life cycle: "How many service calls were placed? If you had paid for labor and parts instead of the contract, would you have saved money? Is the equipment at the end of its life cycle? If not, put that money aside for those one-time occurrences," he says. 9. Renegotiate vendor agreements Remembering that the current economic and business woes also extend to vendors can work to your advantage, Lazarus says. Renegotiating contracts can save you some fast money -- especially if the vendor is open to talking so as to save your business with them. "Generally, if you're in an environment where you need to cut costs, they are too," Lazarus says. "If you have leasing terms on hardware or software or office equipment, oftentimes you can go back to the leasing company and cut new terms or stretch out the terms, or explore different types of payment plans." 10. Conduct a communications audit Communications costs represent a big piece of IT costs, Gartner's Stanco says. "Communications cost have been on a trend downward -- if you can renegotiate those costs or with RFPs [requests for proposal], you'll see great savings. Usually it takes a couple of months to be effective and the vendor gives you back credit to apply to the delta from time of negotiation to implementation." Volpe says that any IT manager seeking to renegotiate must be very strong with vendors: "They have to know you are serious." Volpe also suggests conducting an audit on communications costs: long-distance, circuits, wireless, ground lines, and audit of services. "Check everything you've signed up for and what's been canceled. Audit all the communications costs: long-distance charges, circuits that were supposed to be disconnected and weren't, billing patterns -- whether [you're] being billed properly. You'll find one-time savings with cancellations."  Analysts' top three picks How can you get the most bang for your IT buck? By directing your company to spend money, despite the downward-spiraling economy, on technologies that offer a long-term payoff. This is the best time to reorganize your IT infrastructure, explore new commerce models, and focus on your customers.
RELATED ARTICLES  Discuss cutting costs in a live forum event on Oct. 2 at 10 a.m. PDTRELATED SUBJECTS Professional DevelopmentSPONSORED WHITE PAPERS 
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