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.