Thursday, March 27, 2008

Seven Ways to Reduce IT Costs

CIOs have already been betrayed by the economy. Next, will they face financial mutiny by their own boardrooms? Instead of waiting to find out, now is the time for smart CIOs and their trusted IT partners to reduce costs before the big budget cuts happen. Here are seven ways for CIOs to get started.

1. Assemble Scouting Parties: First, you need to assemble a team to examine your current spending. Ideally, this team will consist of your best IT engineers, at least one member of the accounting department and someone from the legal department. Their job is to examine every aspect of the IT department to identify areas where cuts can be made. They should also look for potentially wasteful processes and shortcuts to the current operational methodologies.

2. Make Other Departments Walk the Plank: Work with your accounting liaison to see if you can’t push some of your IT budgets into other departmental budgets. If you are supporting equipment or systems that only serve a single department, then get those items off your IT budgets! This takes the onus of justifying those systems to the real users and off your shoulders. If it is genuinely worthwhile then they will fight to keep it. If not, it is something less for you to worry about. While this won’t necessarily make you very popular with other department heads, it makes sound financial sense. This is where the accounting liaison can help you most.

3. No Fancy Cannons: Don’t let some article in your favorite magazine or blog convince you that the latest buzzword is the savior you have been looking for. The current buzzword is “virtualization” and I am telling you it is highly unlikely to actually reduce costs. Before you jump into any virtualization project make sure to perform a complete cost-benefit analysis. You might be surprised to realize that the actual cost savings is lower than promised. Ignore all the other industry buzzwords, too. I have yet to see the buzzword that actually revolutionized anything. Stick with tried and proven business principles and you’ll be fine.

4. Set Strict Rations: There are too many CIOs who treat their corporate technology infrastructure like a private playground. They spend company money on cool gadgets and systems so they can “test them out.” This is fine when times are fat and the money is pouring in, but a different mindset is mandatory when times are lean. Your new mantra shall be “Only what we need, not what we want.” Insist that departments must provide you with a good business case (in writing) to justify the purchase of whatever new toy they want.

5. Unleash the Shark: Unleash your team’s lawyer on all your IT contracts. Revisit telecommunications contracts and demand a better rate from your provider. Examine outsourcing contracts and squeeze them for every cent. Encourage the lawyer to release his inner shark! I have a near 100% success rate renegotiating telecommunications contracts for customers. As the recession looms closer, offer your telecom provider a longer term in exchange for a lower monthly rate. See what other deals you can negotiate with your other providers, too.

6. Unload Old Booty: Stop throwing away old equipment. Computers, cell phones, fax machines and every other piece of office equipment can be sold on eBay or to local dealers. Not only does this help reclaim some money from salvaged gear, it also eliminates the costs associated with the disposal of information technology equipment. In some cities, disposing of a single monitor can cost as much as $50.

7. Count All the Coins: While the IT team is chopping away expenses, the accountant should be quantifying every reduction. Also, accounting should quantify all the process changes and assign a “reclaimed” dollar value to every one. Now when you present your cost saving measures to your bosses, you can express the true dollar value of all your changes. Leaving out the reclaimed dollars shorts your efforts at thrift.

With these seven steps you should be on your way to proving your value as the company CIO. It’s always better to be proactive and these efforts will make you look great to your bosses. Just put your knife between your teeth and prepare for war. By making your department leaner and tougher, you will be better able to weather the coming recessionary storm. Management will approve of your efforts and will congratulate you for your vision. Remember, the job you save might be your own.


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