Special Report: Hidden Savings

The technology function might seem an unlikely source of help for businesses looking to tighten their belts and purse strings, but it can hide an array of easily accessible cost savings... it is simply a question of knowing where to look, says Gareth Kershaw.

An incredibly wise, if perhaps slightly sick, person once postulated that in the land of the blind, the one-eyed man is stoned to death. And as hard-line and cynical as that might sound, it is a hugely prescient and alluring philosophy in the current climate.

- Flailing and flapping around and glibly charging their departmental heads with cutting costs and head counts and maximising efficiency, few boardrooms seem to recognise the irony that
they are asking the blind to lead the blind.

Myopia notwithstanding and strange as it may seem given technology's reputation however the ideal place to begin unravelling the complex knot in the blindfold is, of all places, the IT department.

Indeed Keith Pearce, EMEA Marketing Director for Genesys Telecommunications, believes that with what he calls intelligent automation, tightening the belt doesn't have to be all doom and gloom. In fact, he says, it is a golden opportunity to gain competitive advantage.

For many companies the first step is, quite rightly, to stop, take stock, and adopt a "back to basics" approach, says Dan Power, European Sales Director at systems management vendor KACE. But while the general aim is to support the reduction of capital costs and overheads - most commonly by weighing up existing IT resources and trying to refurbish, recycle, and re-use them wherever possible - this is something with which many companies struggle as they don't have a sufficiently granular view of the assets they're trying to rationalise.

Accordingly, he suggests, the first key fundamental in identifying the cost savings hiding in an existing infrastructure is to properly identify the infrastructure itself. Going over your asset register is a commonsense place to start. But the trick, according to Karen Conneely, Group Commercial Manager at Real Asset Management (RAM), is to go beyond asset management and think asset accountability. Because while most firms have fixed asset registers, not every business deploys theirs in a way conducive to saving money.

"Currently, the majority of companies don't even accurately record the number and location of assets, let alone their purchasing and maintenance histories. In a recent survey of 300 datacentre managers, over a quarter didn't know how many servers were under their control; more than 40% found they had servers they didn't know they had, or had gone looking for servers only to find they'd been retired."

Resource audits, she says, typically reveal that less than 40% of the business's registered assets can be easily identified, and that an estimated 10% are no longer even in existence. Often exacerbated by diverse recording strategies and inadequate record keeping, this can lead to a sketchy, fragmented approach, detrimental to the business in all kinds of ways.

While accurate records will maximise and optimise the lifespan of an asset, for example, the opposite is true of poor record keeping, which could see old equipment kept online after its useful lifespan is over, and other kit "end-of-lifed" before its time.

"Companies with a loose grasp on which assets are and are not ready for disposal are far more likely to throw the baby out with the bathwater and dispose of assets prematurely", says Conneely. "In addition, any changes to the value of an asset throughout its lifecycle should always be reflected financially, allowing correct calculation of depreciation. Failure to do this simply undermines business value."

A properly managed fixed asset register can be as beneficial as a poor one can be damaging however - in cutting the cost of commercial insurance premiums and business continuity and disaster recovery plans; and in reigning in the expense of fines resulting from legislation such as the WEEE directive among other things.

A clear asset maintenance and disposal policy is also useful in signalling your commitment to 'soft' strategies such as Green IT, carbon reduction and neutrality, and Corporate Social Responsibility (CSR) - which in themselves can now have a major impact on the business's top and bottom lines.

Indeed, while it's tempting to put "secondary" concerns like one's green and IT disposal strategies on a back burner during an economic downturn, this can prevent a whole array of savings coming to light and is therefore both short-sighted and short-termist.

This according to Jason Day, MD of technology disposal and recycling specialists, Trans IT. "Even if you consider yourself the kind of hard-nosed businessperson who is left cold by the whole green, save the planet, recycling thing, you can't ignore the hard financial benefits of a sound IT disposal policy. Redundant kit can often be recycled and re-used at a fraction of the cost of new capital equipment. You can save as much as 90% on the cost of new kit by refurbishing and redeploying existing assets. Alternatively you can refurb and resell old equipment and put the proceeds towards the new infrastructure." "Whether it's servers, desktops and laptops or monitors, printers, fax machines and AV kit, it's possible to make 30% or more on recycling IT estate. That's hard to ignore."

A simple but dull answer, says Ennio Carboni, VP of Network Management at Ipswitch, is to always adhere to good procurement practice, to shop around, and to keep a very sharp eye on down the line costs. "Basic good commercial practice and identifying down the line costs will still result in both up-front savings and reduced TCO", he says. And this alone can result in 1000% savings in certain sectors - specifically in what he describes as undifferentiated markets in which competition doesn't operate in a conventional way, such as network management.

Even in sectors in which one might expect a degree of commoditisation - in which you might expect one piece of hardware to cost, give or take 20 or 30%, much the same as another - a product from one vendor can still cost as much as ten or even 20 times more than that of an comparable alternative solution.

Software is another important consideration when it comes to reducing outlay. And although 'Free' software and SaaS (Software as a Service) may be flavour of the month right now, firms shouldn't let the hype put them off. 'Cloud' based software and services are, at the very least, worth investigating. Also, while most organisations will account for the capital and ownership costs of buying software, thanks to ad hoc and departmental buying behaviour, too many have redundant licences lying around unused. Worse still, most don't even realise it.

Software can drive operational savings too. Free or low-cost facilities from firms like telephone conferencing provider Powwownow can deliver savings on travel and hotel expenses, opportunity costs, and other indirect cost centres, for instance. (Operating an ethos of no booking, no billing, no fuss, Powwownow doesn't invoice the customer; the cost of an 0870 call is simply added to the user's bill).

The company claims that of the £210m spent annually on conferences-by-phone, a massive £55m is currently being "wasted", noting that many firms remain "shockingly unaware" of the offers and the cost savings available. The same is true of other communications disciplines according to telecoms service specialists Turnstone Services, which works with companies to identify areas in which they may be over-spending.

It cites instances of clients saving 25% on PSTN fixed line costs by removing unwanted lines, 38% on fixed-line and broadband costs by consolidating contracts to a single supplier and, in one case, over £1m by challenging service uplift costs at contract extension rather than automatically accepting them.

Another business saved 10% on its £100 million third party IT spend by challenging suppliers to help reduce costs, and this challenge should be applied to all contracts, says Turnstone.

Of the myriad of other specific IT disciplines in which fast, often sweeping cost reductions can be achieved with relatively little effort, print and power are among the most obvious and we look at these in more detail in the next two pieces in this issue's Special Report.

What it all comes down to however, is thinking not only about how your business can save money on its technology, but how the business can save money WITH its technology.

The IT Cost Reduction Hit Parade

Locating the cost savings "hidden in plain view" around your IT department.

• Maintain good procurement, TCO, down-the-line cost management practices

• Negotiate hard on all contracts - if you don't ask...

• Consider wastage. Technology-audit the whole business, not just the IT department.What departmental purchases are taking place? Can they be centralised to exploit economies of scale?

• Improve asset management and accountability for all assets, not just hardware

• Question. Do you really need to buy that software/hardware? Sign that contract? Make that trip? Are there other options? Don't just think about saving money on your technology, but how technologies can save you money.

• Think Green - environmental agenda aside, it can be a great way to save money.

• Think beyond IT - how can what the IT department does impact the business cost base as a whole? Can the IT practice save other departments money?