Another basic but beneficial framework used to evaluate an organization’s potential for material reductions in IT spending is the IT Efficiency Phase Model (IT-EPM). The IT-EPM illustrates the required levels of organizational change and disruption relative to the expected achievement of efficiency in IT service delivery.
In both the media and trade press, much has been written about the impact of the Modernizing Government Technology (MGT) Act. Entire trade conferences were created and executed based on this singular topic. Many of the articles and discussions have focused on the unique mechanics regarding how funding provided by the Act will be disbursed to qualified projects, in addition to how the fund itself will be run. Others have emphasized the importance of transitioning off legacy technology and onto the latest available technologies, which in many cases, happens to be a subtle marketing pitch by vendors for their own technology offerings (just read the small print at the bottom of trade press articles about who the author is). However, in all these discussions about leaving old technology behind, there is a key topic that almost no one is covering: organizational change management.
Organizations typically realize significant benefits from using a web content management platform in lieu of the traditional webmaster-driven single file per page approach. The advantages are frequently so substantial to an organization that it represents one of the key levers an IT organization can pull that almost always increases the effectiveness of the function and reduces its cost.
The acquisition, planning, implementation, support, and retirement of IT applications, referred to collectively as the system lifecycle, is often one of the largest areas of IT spending for an organization. The standardization of system lifecycle processes as an efficiency lever focuses on achieving enterprise-level delivery consistency across all phases of the lifecycle. In addition to providing a framework for efficiently managing individual systems-related work, a standard system lifecycle management approach can provide organization-wide visibility into system-related resource utilization as well as financial and project status.
Due to unmanaged growth in print resources stemming from few policy or acquisition controls, many organization’s printer fleets consist of a diverse set of dedicated and networked printers representing a wide variety of makes and models.
Traditional approaches for measuring organizational or project performance typically focus on the identification and collection of metrics or key performance indicators (KPIs). Improvements are then measured as changes in these metrics. While this approach is better than not identifying any performance measures, it typically falls significantly short in terms of measuring progress associated with IT spending reduction efforts.
In many organizations, technical infrastructure, defined generally as server, storage, and networking capability and capacity is deployed on an as-needed basis in response to additional requirements such as the deployment of services, applications or web sites. The frequent result of this organic approach to infrastructure is a data center environment comprised of a wide variety of makes, models, and configurations located in a variety of locations.
When many organizations refresh their desktop systems, they often use what is essentially a single tier strategy, deploying the same desktop system to all individuals. The resulting homogenous environment often improves the efficiency of support and enables improved discounts based on volume. The single-model strategy is frequently unfeasible in many environments however, where there are large populations of ‘standard’ and ‘power user’ populations. In these instances, a multi-tier strategy is often used to address the diverse needs of users.
When evaluating potential opportunities to cut IT costs, there are a number of factors to consider. Of obvious concern is whether the level of time and money required to realize savings is worth the investment. This straightforward evaluation is based simply on whether the savings will exceed the required investment as well as any other opportunities that compete for the same time and money.
Another major lever of IT efficiency is the use of standardized enterprise-wide architectures for a broad range of components related to an organization’s IT investments. The standardization of an organization’s approach to various aspects of technology typically enables significant re-use of existing capability and a material reduction in resource requirements. Regardless of industry or organization type, the fundamental components of IT systems and the components used to support them are, for the most part, identical.
Open source software, which includes a wide range of software tools, utilities, and platforms available to organizations, represents a class of software that is largely developed by open communities and usually distributed free of charge for commercial use. Organizations that leverage open source software across the enterprise often realize a number of efficiencies including low or no initial and upgrade license acquisition costs as well as reduced support requirements in a number of areas. Additionally, open source software typically gives an organization just that - open source code from which they can modify or enhance to meet specific organizational requirements, rather than wait for vendors to address requirements in future versions of their software.
Virtually every IT group possesses some level of opportunity to reduce IT spending without sacrificing technical capability, capacity, or quality. However, certain characteristics lend themselves to greater opportunities for increased efficiency. Organizations with significant opportunities for reducing undesirable IT spending frequently possess one or more of the characteristics summarized below.
A mature asset management function is another important component of an organization’s ability to effectively control IT costs. In addition to helping the organization better leverage idle or under-utilized assets, the existence of strong asset management can significantly reduce technical support and administrative costs.
Securing the best possible price on IT products is critical to the health of any organization that spends a material amount on information technology. But there are tactics both ethical and unethical that can damage not only your future ability to secure the best possible pricing but also you and your organization’s reputation.
Many organizations incur monthly charges for a wide-variety of IT services based on a number of subscription or other variables, such as headcount. The provisioning of these services is typically unavoidable as new employees, contractors, interns, and other staff require access to e-mail, phone, and other IT services. Additionally, as organizations continue to rely more heavily on cloud or outsourced providers for services, the need for external provisioning of services is increasing.
When vendors sell a piece of hardware, they’re often counting on more than the initial product margin, they’re counting on a 3-5 year revenue stream from the annual support contracts or warranty uplifts that many companies buy along with the product. The gross margins on support can be as high as 100% for the vendor, depending on the customer’s use of the support.
IT spending is frequently mischaracterized as an expense that should simply be minimized or avoided whenever possible, similar in view to that of office supplies or real estate square footage. In reality, IT spending is often one of the best areas of investment for an organization. Increased IT spending can, for example, significantly enhance employee productivity, provide a better experience for customers, help develop new products, or open new markets.
Many organizations do not possess a policy and capability for maintaining spare IT hardware assets as an internal support tier, instead relying on vendor support to achieve the service levels required for any given hardware asset. However, the cost of support agreements that provide parts replacement is in many cases not competitive with an effective sparing policy. For example, in many cases the difference between the annual cost of basic and premium support levels is the provision of on-site spares, yet the price difference between the levels is more than fifty percent of the equipment’s original cost.
Many organizations maintain a highly fragmented approach and set of processes for requisition of vendor products and services, frequently using separate workflows and processes for approval by a disparate set of individuals. The lack of consolidated and centrally managed requisition and acquisition functions frequently inhibits an organization’s ability to manage spending at the point of initiation, where significant opportunities exist to shape or even avoid purchase. Additionally, the ability to implement standards as well as gain broader visibility into organizational spending is often made unfeasible under a decentralized approach.
There’s no question about it, vendors love to bundle services and support with product costs. The reason: the margins on services are the highest for vendors, and no vendor wants to make it easy to negotiate these costs. But for the purchasing organization, these services are usually the best to negotiate down exactly because of their high margins. Ensuring the vendor breaks out the pricing is obvious, but sometimes the vendor won’t budge on support, training, or implementation costs. The reasons for this are numerous.