ORLANDO, Fla. -- Cutting costs is "never an activity with long lead times," Gartner Inc. guru Ellen Kitzis said...
at Symposium/ITxpo 2008 in Orlando. Kitzis, a research vice president at the Stamford, Conn.-based consultancy, teamed up with colleagues at a packed 8 a.m. panel to give CIOs a roadmap to trim costs.
Here are their 25 tactical tips across four categories: IT management; enterprise software; enterprise infrastructure and operations, the networks and telecom; and enterprise infrastructure, hardware and IT operations.
- Focus initially on cutting "people costs": Freeze headcount, reduce/eliminate special bonuses, reduce regional support.
Kitzis said 37% of an average budget is spent on people costs, including money paid to contractors. According to Gartner, companies were planning to spend $13,454 per employee, and that is already down $200, or 1.7% per person. Painful to talk about, this area is a big target -- but use a scalpel. Keep people who ensure the greatest transmission of business knowledge.
- Flatten organization structure: Move to collaborative, team-based models.
More people are working in virtual teams, and the model is reducing overhead administrative costs, Kitzis said. It's not unusual for managers who oversaw seven people to now manage between 15 and 20 people.
- Accelerate the progress of centralized and shared services: Leverage enterprise-wide competencies, reduce staff embedded in business units.
Organizations are seeing a 15% to 20% reduction in costs by moving to shared services. But proceed with caution. Start by benchmarking your current costs and mapping your operations, so you know who you have to keep and which people can go.
- Bring a qualified finance person into your IT leadership team, perhaps on loan or on temporary contract.
CIOs take a knife to their budgets, only to find the cost savings have been shifted to other business units. "Make sure these cost are really taken out," Kitzis said, by using an accounting expert. Also, tap legal expertise to review contracts for penalty clauses and other terms as you make cuts.
- Maintain or strengthen relationship management roles: Business analysts, business process and industry experts, account executives, relationship managers.
- Take control of "unmanaged" costs you can measure and cut easily, such as data center power consumption or printing.
Be smart on the managed costs. Re-educate the business on service-levels agreements (SLAs) and let them know what happens when SLAs are reduced by 5% or 10% before making a move.
Cut costs in enterprise software (Caution ahead!)
- Use invoice verification.
The industry has seen a slew of acquisitions. Big vendors have snapped up small fries with 1,000 customers apiece. It's easier for them to apply their boilerplate policies to inherited customers and wait for the complaints than it is to review contracts individually. You can save 5% to 10% by correcting those invoices or play hardball when you agree to a new contract.
- Eliminate unused software/modules.
Understand who's using what and why. Lots of closet cleaning here.
- Apply more sophisticated negotiations.
"You can't put someone who bought pencils into a negotiation" with a big software vendor, Gartner's Bill Snyder said. "They'll get eaten alive."
- Use alternative products included in previous deals.
When budgets are bountiful, IT demands tools it may not need. You may have to decide between using a tool and keeping "Joe," Snyder said. Maybe in these times, you'll decide you can do without the tool.
- Introduce competition for existing products.
You must foster vendor competition if you hope to lower costs. If you decide to switch, make sure you calculate the cost of taking out the incumbent beforehand.
- Use "best-for-need" rather than "best-of-breed" products.
You could be paying as much as a 50% premium for best of breed, Snyder said.
Cut costs in enterprise infrastructure and operations: Networks and telecom
- Use telecom expense management services (save 10% to 35%).
Nobody can keep track of this stuff. Hire a professional to source, benchmark, negotiate the contracts, etc., and audit the bills.
- Move to corporate liability for wireless services (save 15% to 30%).
Who's responsible for the bills of individuals, what devices they use? The enterprise should take control and set standards, Gartner analyst Phil Redman said.
- Reduce the reliability target for a location by "one 9" (save 30%).
- Collapse rich media conferencing into a premises-based multi-control point unit (save 60%).
As hardware costs come down, building your own videoconferencing center can save big money over the long run, assuming you do a lot of it.
- Deploy IP telephony and Voice over Internet Protocol (save 50% to 80% of maintenance).
- Use the Internet as corporate transport (save 10% to 80%).
Cut costs in enterprise infrastructure, hardware and IT operations
- Defer 2008 Windows XP PC replacements to 2009.
Three-year-old PCs and 2-year-old laptops might be able to go another year, but you should be mindful of the maintenance costs, Gartner analyst Michael Silver said.
- Exploit commoditization: the best-for-need instead of best-of-breed argument, redux.
- Make better use of existing tools by improving process and policy.
"It's not always the tool's fault," Silver said.
- Defer client architecture pilot/evaluation projects.
- Implement thin provisioning and data de-duplication for storage reduction.
- Consolidate and virtualize servers.
Emerging trends in IT cost pressure
- Target two or three areas for "zero-based budgeting" in 2009.
Start the process soon, Gartner's Kitzis said: "Current-year cost-saving opportunities will be revealed."
Let us know what you think about the story; email: Linda Tucci, Senior News Writer