The pressure is mounting for CIOs to find ways of cutting IT
costs, writes Written by Robert Saxby, senior consultant at Metri
http://www.metrigroup.com
The first challenge is to identify areas where one can save
money. The second is how to cut costs without sacrificing
performance or quality. This article looks at five effective ways
to achieve both.
1. Consolidate providers
Large organisations with multiple business units typically have
more service providers than they need. This not only adds layers of
complexity to the IT infrastructure, it reduces negotiating power.
By reducing the number of supplier relationships, customers gain
economies of scale and can negotiate better prices. Consolidation
also helps to simplify the IT environment, which reduces
maintenance costs and makes it easier to manage existing providers
and stay on top of contracts to ensure best terms on renewal.
2. Rationalise systems
Many corporates own a plethora of disparate hardware, software
and networking solutions in the front and back office, operating at
departmental and enterprise levels - many of which do the same
thing in slightly different ways. Identifying these redundancies is
frequently anything but straightforward but can reap huge benefits.
Metri recently helped the Dutch government save some 50 million
euros in IT support costs simply by reducing the number of desktops
across its 15 ministries. In addition to lower maintenance costs
and economies of scale, rationalisation simplifies inventory
management and streamlines the IT architecture.
3. Identify "spend to save" options
When times are tough new IT projects are more likely to be put
on ice, supplanted by a single-minded determination to "cut costs
to the bone". But tough times are exactly when some new investment
should be made - for example, migrating to an open systems platform
that will increase efficiency, reduce operational costs and lead to
a much lower total cost of ownership over time. Implementing a
quality assurance programme can safeguard against diminished
service quality arising from staff reductions and other
cost-cutting measures. While quantifying return on investment may
be more difficult in this case, it is the company with a reputation
for quality that has a better chance of expanding quickly and
capturing new market share when the markets turn up.
4. Control the contract and get what you need
CIOs often feel victims of "cost-creep" but cannot pinpoint how
or why because of the opacity of their outsourcing service
contract. On renewal, significant sums can be saved by studying the
terms and not allowing the supplier to dictate them by default. The
provider may be trying to reclaim earlier loss-leaders, or they may
have found the client's environment more complex and maintenance
costs higher than expected. The client may have originally
requested a premium service with a guaranteed 99.9% uptime (costing
25% to 30% or more extra) where a standard one would suffice. Or
various departmental managers may have ordered extra services from
the provider direct, bypassing central corporate control. All of
these factors can result in cost-creep, making it vital for service
contracts to be thoroughly assayed upfront - if not internally,
then by an outsourcing specialist.
5. Demand price transparency
Another way to save money when using an outsourcing supplier is
to plan ahead, since there are often cost implications in doing
rush work. Clients should also demand pricing transparency when it
comes to the cost of individual service components, so that they
can compare these prices against other suppliers' service
catalogues on an "apples-to-apples" basis. Without this clarity at
a granular level, there is no objective basis for assessing whether
one is paying under or over the odds.