Cost Control

You could be throwing your money away.  

Economic Lenses: Decrease Spend, Increase Value, Avoid Costs

IT has long been thought of as a cost center, but there are real opportunities to change this by taking a leadership role in bringing the business opportunities to leverage technology to improve performance, utilization and increase ROI. In this blog we will outline strategies for spending pitfalls within IT and across the business.

Typically a procurement team makes buying a science, never paying more than they should for anything. Purchasing the various items and components and being as efficient with every dollar spent is an important step in the buying process. However when we narrow the conversation to just technology spend within an organization, we heard loud and clear from our panel, “This is really an opportunity where IT can, and should be, showing leadership of where technology can be leveraged for competitive advantage,” Kevin Crowe, Vice President of Procurement Services.

When we asked the panel to expand, here are a few things they suggest that our customers consider when looking for inefficiencies within their organizations:

  1. Do the parts really come together to deliver a solution that the business needs to move the business forward? Is the whole greater than the sum of its parts?
  2. When making a purchase decision do you have a full understanding of the TCO beyond the purchase price?
  3. What is the ROI of the solution? Sometimes what feels like too large an investment can provide the greatest ROI.
  4. Are you standardizing an approach based on the requirements of the most demanding workloads?
  5. Have you prioritized short term fixes and introduced complications that could mean more expenses later?

 

Let’s look at some scenarios that help illustrate these potential pitfalls for inefficiencies in spending:

  • Shadow IT: If the business finds a solution for their immediate need and can’t wait for IT, what’s the harm in making an investment in a solution that can help increase Line of Business (LOB) operations? If we ignore the potential security and compliance risks, this one “trend” can have a significant negative impact on your business by driving down efficiency and increasing costs. This bad habit in the long run could mean that you are investing in buying and managing redundant applications if LOBs aren’t aware of each other’s purchases. What happens if integration with other applications or business processes isn’t thoroughly vetted and requires extensive customization? Could a similar tool be negotiated as part of a larger purchase to drive down costs?
  • Hidden costs of hardware: Does the cost of upgrading your hardware seem too expensive to justify when your existing infrastructure hasn’t reached end of life? You could be wasting money and not even know it. With improvements to hardware on the market today and the reduction of energy consumption, a quick TCO or ROI analysis may show that even with an initial outlay of capital you could reach a breakeven point faster than you would imagine.  These kinds of initiatives may even make you more effective at using the existing resources you have. In addition, the cost of upgrades can become complex and expensive if you leave migrations too long, as talent goes away from managing older equipment.
  • Employee travel and collaboration initiatives: You want your employees to collaborate and be effective, but the cost of travel is expensive both in hard costs and the cost of the lost productivity when your team in on the road or in the air. Enhancing your collaboration tools to include video conferencing and even instant messaging can radically reduce costs and improve productivity. Not only are you no longer spending money on travel, but you are giving your team the ability to move faster. Waiting “until I see them” turns to, let me see if they are online so we can collaborate now.
  • Application rationalization: We see lots of companies that have 1000s of legacy applications with only a handful of users, or 3 or 4 applications providing similar capabilities. “The support costs (maintaining a knowledge base to resolve common issues and incidents and keeping data fresh are extremely high. You need to take a good look at the legacy things being supported today, and make a plan to take them out of the environment with a replacement for the users.” -Judy Benda-Schnurr, Director of EUC Practice. Another area to look for efficiency is in software that has been purchased yet hasn’t been executed on, and there is a lot of opportunity to get it operationalized and working. Or alternatively deciding it wasn’t the right purchase and turning it off so you aren’t paying for future renewals and maintenance on software assets.
  • Standardizing for mission critical workloads: You have mission critical workloads and they must be running on mission critical infrastructure, your business can’t afford to do anything less. However, are you standardizing all of your infrastructure or solutions based on the needs of your mission critical apps? It is more common than you think, since standardization means better pricing, fewer skills needed for management and maintenance which help drive down costs. But more data is needed to understand if the TCO of standardization on one technology is the best option. Could it be more beneficial to use commodity solutions basic workloads, such as archiving? For many organizations we recommend exploring taking a blended approach, perhaps standardizing on a vendor instead of a technology. “You should consider matching up application infrastructure cost to better match the needs of the applications, since not every application is mission critical,” Bill Evelyn, General Manager of Practices. “That should include looking at on premises but also at cloud solutions where you might be able to provide it at a fraction of the cost.”
  • Efficiency: If you’ve maximized efficiency within the IT department (infrastructure, internal vs outsourcing, cloud for availability), a good CIO will look at how they can use technology to help drive savings in other areas of the business. “If you look at the history of technology over the last 30 years, what has technology been really good at?  Efficiency. Take a complex problem or a labor intensive problem, apply technology to it, and deliver it more cheaply, more effectively and with a better business outcome. That’s why companies have IT companies. Now extend that model to drive efficiency in other areas of the business,” David Dickinson, Strategic Business Solutions.

 

Something to Consider:

There are many ways an organization can be wasting money through inefficiencies, too many to list here – so consider this: You know what you know, you know what you don’t know, but there are also unknown unknowns. It is not knowing what you don’t know that often can be the biggest waste of time, money and resources, that is why we recommend finding a trusted partner.  As a trusted partner to our clients, we can look at your organization with objective eyes and help you find opportunities to increase efficiency through centralization, standardization, modularization, optimization and outsourcing that you may not have even considered or realized the full economic impact of making changes. We would be glad to have this conversation with your team!

Next up – Part IV: Your Crystal Ball is Broken