A Cost-Cutting Conversation Worth Having
In lean and mean times, small and midsize businesses often cut capital expenditures and discretionary operating expenses. Many fellowships defer hiring and limit their investments to those with short payback periods and a high return on investment. That is not surprising. These are natural reactions to economic uncertainty.
Server
Information technology (It) is positively not immune to budget cuts in a slow economy. In most small and midsize companies, It represents a big chunk of the operating budget-and a big occasion for cost cutting. In fact, the question is no longer, either It expenses can be trimmed. In a recessionary environment, the real questions are how much of a company's It budget is fat, how much is muscle, and how can you tell them apart?
For most companies, these questions have never been more important. The fact is that today, It plays a key role in the success or failure of a business. An organization's It infrastructure has come to be an critical component for doing company in a connected world where customer expectations and competing threats are growing continually.
Companies must therefore be particular not to make the wrong cuts in the wrong areas. For instance, if your network were to go down, how long would your company survive? How long could you afford to be without e-mail access? How would your company be affected if you couldn't send out orders or proposals for a few days? And what would be the impact of losing all your company data for the past five years?
Fortunately, there is plenty of room for cutting It costs without risking your company or your capability to serve customers. The hidden lies in knowing where the fat resides-and in knowing how to trim that excess without affecting the meat and bone needed to utter salutary company operations and found a competing advantage.
Based on our 17 years of perceive working with small and midsize fellowships on their It infrastructure, this report provides practical tips and objective recommendations to aid businesses in their cost-cutting endeavor while an economic downturn.
Where Do You Start?
There is no such thing as a foolproof template for It cost reduction. Every company has different company objectives, competing challenges, cost profiles, company models and It requirements. However, when embarking on a strategic cost-cutting journey, it is helpful to break down It into three main buckets:
Existing hardware and software
Existing seller agreements
Current It staff or outsourced It services provider
#1 -Maximize the Value of Your Hardware and Software
Hardware
As tempting as it may be to forgo new hardware purchases and software upgrades while lean times, in many cases it positively makes better economic sense to move send with a technology refresh-even in a recession. Because most hardware carries only a three-year warranty from the manufacturer, a procedure of if it ain't broke, don't fix it. Will often drive up a machine's total cost of ownership (Tco) to a level far higher than if the hardware was supplanted more frequently.
When considered planned and executed, a shorter hardware exchange cycle keeps maintenance and warranty costs at a minimum by letting the manufacturer bear the costs of retention your machines running. For instance, with a three-year warranty, your initial buy price (Ipp) on a laptop computer is your Tco. However, after three years, the warranty expires and your Tco starts to climb as the risk of aid outages increases and maintenance costs are no longer covered by the manufacturer. As a result, years four and five add incrementally much more to Tco than did the first three years.
Is your recently purchased equipment running slower than you would like? While waiting for your next technology exchange cycle, there are simple things you can do to help boost the efficiency of your current Pcs and servers. For instance, you should periodically:
Spring-clean hard drives
Run maintenance tasks (e.g., defragment drives)
Uninstall applications that are no longer used
Run virus scans, even if you have anti-virus software
As insignificant as these tasks may seem, they can help boost the efficiency and speed of your machines dramatically. They can also keep you from having to buy new ones before your next scheduled refresh while boosting worker productivity and improving customer service.
Another area in which fellowships can often make critical improvement is law security. Something as simple as.locking down. (a simple measure that prohibits users from installing software or changing law settings) all Pcs and laptops prevents malicious software from being unintentionally installed in users' machines-software that can lead to virus outbreaks, security breaches and productivity drains. In fact, agreeing to the examiner firm Gartner, this security measure alone will reduce a company's total cost of ownership on a Pc or laptop by 42 to 45 percent.1
Software and Operating Systems
Just because the software manufactures is continually rolling out new upgrades doesn't mean you need to supervene their lead. Waiting at least six to 18 months before rolling out an operating law upgrade or an upgrade to an existing software box is a wise move. In many cases, not only are there often hidden training costs involved with a software upgrade, but there are carrying out issues to consider-from the standpoint of both your existing hardware and the instability inherent in most new software upon its release.
Security Software
When it comes to retention your network secure, the best explication for most fellowships is to outsource the function to a hosted security provider. For one, the threat of phishing attacks, viruses and data leaks is higher than ever, and new threats face daily. In fact, the company gateway security company get Computing recently reported that the number of spam messages doubled from 60 billion in 2006 to 120 billion by November 2007.2 This is a troubling pattern, because spam often carries viruses and trojans and takes up so much critical server space, which slows down the network. Someone else fancy to outsource this function: security software is only as good as its last patch or upgrade, and retention up with the multitude of software options and antidotes is too difficult, high-priced and time-consuming for most companies.
#2 -Maximize the Value of Existing seller Agreements
Leasing vs. Buying
A suitable estimate of existing seller contracts almost always turns up multiple opportunities to save costs without sacrificing quality. For instance, in most cases, leasing your computer hardware, copiers and software can translate into critical cash flow improvements.
The case for fellowships leasing their It in a down cheaper is compelling. First, today's technology has a very dinky shelf life. However, you don't have to dispell that depreciation in value. Leasing fellowships are contribution leasing rates as low as 6 percent and even bundle all the equipment's connected soft costs (e.g., premise services) into their contracts.
Instead of having to make a large capital investment every three years, leasing allows you to keep revolving your compact and to pay a small, fixed monthly fee. The impact on cash flow can be dramatic. For instance, a ,000 equipment exchange and software upgrade task can be leased for a monthly cost of nearby ,500-a much more manageable cost in a climate where cash flow is king.
Internet/Telco
Telecommunications costs are often one of the top five expenses for small and midsize companies. But what is truly disturbing is that even after the BellSouth and At&T merger, prices for bandwidth continue to collapse while telecommunications expenses for most businesses are flat or even growing. For one, agreeing to Gartner, fellowships typically waste 10 percent of telecom budgets on outdated services or errors. Moreover, many fellowships do not realize they can renegotiate their contracts. And those who do aren't sure how to go about it or how to find areas of savings opportunities.
Once you know where to look, the savings in this area are often substantial. In fact, we continually save fellowships more than ,000 per month, without sacrificing quality, just by renegotiating their Internet/telco contracts. If you are looking to do this on your own, always use one seller for both services. This alone usually lowers your total cost. Furthermore, just as with insurance, it pays to keep reevaluating your aid every year to make sure you are always getting the best deal possible.
#3 -Maximize the Value From Your It Staff or Outsourced Provider
In a recession, it becomes even more important that you focus on maximizing the efficiency of the person or group in fee of running and maintaining your It infrastructure-whether that personel is you, Someone else worker or an face provider.
Internal It Resource
If you currently employ an internal resource, it's worth asking: Is facts technology the only responsibility this personel has? If not, how much time and endeavor is this person investing to administrate and utter your It? If this worker didn't have peripheral responsibility for It, what other activities could he or she be working on that would add value to your company and your customers and help boost the bottom line? As a part time It person, does this personel have the expertise to deal with all your It needs adequately, or do you still need to bring in an face person on occasion?
If you are inspecting bringing on a dedicated It employee, how do you know when having such a resource is a luxury? In the metro Atlanta area, a full-time It staffer will positively command ,000 per month plus benefits. You also have to factor in the hidden costs of training to keep this individual's knowledge base current in a field that is enduringly evolving. How does that cost correlate to outsourcing this function? And what are the capability and service-level tradeoffs of the different outsourcing options?
Hourly Outsourced aid Provider
If you are paying an outsourced provider by the hour, the question becomes: How do you minimize this expense? And when do you know if (or when) you've gone too far in cost cutting? In other words, how do you optimize the value of your hourly contract? A.duct tape. Coming to It maintenance and repair- one where you avoid calling the hourly-rate aid provider every time you should-can lead to catastrophic equipment or software failure. The cost to recover from such an event can positively dwarf the cost of an extra aid call when there was still time to prevent the question altogether.
Managed aid provider (Msp)
In the past few years, a trend has emerged for small and midsize fellowships that want big-company services at small-company prices: the It managed aid provider (Msp). This model is not for everyone. However, in light of the current economic slowdown, a growing number of businesses are looking that this Coming makes better economic sense when cash flow, costs and risk exposure are all factored in. Most fixed-fee Msps offer a number of benefits that are even more relevant in a recessionary environment. They include:
1. capability to budget a predetermined each year number for It, which helps avoid budget spikes, spending surprises and last-minute breakdowns
2. Systematic deterrent maintenance of the entire It infrastructure and real-time monitoring for network instability or failures
3. Remote, large-company tools that allow immediate passage to your It network and problems, coupled with scheduled deterrent on-site maintenance by certified network engineers
4. Bulletproofing your network for company continuity and disaster recovery, and fully documenting your network.
Because it is less high-priced to do.fire prevention. Than it is to do.firefighting,. Msps custom deterrent maintenance. An Msp's cost buildings and cheaper of scale can also give your company an important competing advantage. Furthermore, because they fee a fixed monthly subscription fee, the burden of retention your It running efficiently falls on them. fellowships inspecting this model should make sure that the Msp can both work remotely and come on site. Just as important, they should focus their crusade on Msps that do not benefit financially when they suggest hardware or software purchases. That means they are not a vendor.
Scorecard Your carrying out Before development Big It Decisions To find the.fat. In your It budget and avoid cutting out meat and bone, a uncut and objective It estimate is essential-one that scorecards your It based on your unique company objectives. Especially in a recession, no company should make major It decisions without such a particular characterize of their technology infrastructure.
This report provides a beginning place for such an exercise. At a minimum, you should use the three major areas discussed in this document to conclude where your company stands and where the opportunities for low-risk cost cutting lie.
However, fellowships that are serious about weathering the current economic downturn without negatively impacting their critical It infrastructure would do well to engage an experienced third party to scorecard their It performance. The ideal It estimate should focus on scorecarding the following key areas:
It infrastructure
Maintenance practices
Security
Applications
Network security diagnostics
Documentation of It assets for company continuity
Alignment of It to the company's company objectives and strategic plan
The estimate should then lead to a technology roadmap that's tied to a budget. And this budget
should always take into inventory the current economic landscape and the company's goals and
objectives.
Many fellowships are surprised to find that, after conducting more than 500 It assessments for small and midsize fellowships over the last 17 years, 70 percent of Insol assessments do not point to purchasing supplementary hardware or software. Instead, the opportunities for strategic cost allowance and service-level improvements almost always come from trimming fat from It and using existing It assets more efficiently.
Doing More for Less With a Managed Services victualer
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