A phrase commonly used in English is “Cutting Corners”. The question however remains whether we are cutting the right corners? In Part 2, we continue our journey and look at a few more IT cost saving measures.
30 IT Cost Saving Measures - Part2
16) Chargeback and Showback – When it comes to a reality check, these are two ways to present IT expenses to the Business. A Showback helps IT to highlight the costs incurred by the Business without actually charging them with the objective of creating awareness of how much each department is spending and on what resources while the other option is to Chargeback the respective departments with internal bills to make them responsible in their usage (ex: refrain from asking for resources they are not going to use).
Either of them can serve as an ideal pre-requisite to outsourcing IT Services. When one knows how much it costs to provide IT Services in-house, they will be better positioned to gauge what a fair price for outsourcing it would be.
As IT Service Management converges with IT Business Management, the use of IT Business Management (ITBM) suites help provide visibility into how much IT services costs and where those IT services reside including the Cloud.
17) Outsourcing – At the center of any IT cost saving measure lies outsourcing which comes with its set of advantages and disadvantages. The top three advantages of outsourcing with respect to the subject at hand are
Reduce cost of running the service
Reduce asset ownership and utility costs
Reduce the cost of maintaining & training staff while addressing the cost of them going on leave and attrition.
and the top three disadvantages are
Loss of control over productivity of individuals
Loss of transparency over the functioning of the services
Innumerable hidden costs
There are two schools of thought when it comes to outsourcing and there are ongoing debates about which is better.
The first being the single vendor managed large outsourcing deal and the other being a layered approach to breaking down the outsourcing deal into a number of different contracts handled by multiple vendors and managed overall through Service Integration.
a) The first option offers huge economies of scale, operational simplicity and stability but leaves one with monolithic contracts of longer duration, has fewer bids as only large System Integrators can part take and is overly dependent on a single supplier/vendor relationship.
b) The second option generates contracts with shorter durations and provides flexibility, offers more bids from multiple specialist vendors but carries an additional integration risk and therefore requires careful planning and execution."
The above two points are only key highlights of the challenges in outsourcing and the subject merits an article of its own.
Irrespective of the outsourcing model one chooses, it must place you in a position to be able to create and distribute RFPs to multiple vendors. Sticking with an incumbent vendor simply out of convenience does not help and a proper evaluation process needs to be put in place before purchasing IT products or services.
18) Hosting Services – It is analogous to buying or leasing space in a multi-tenant building where a good long term decision is of paramount importance as moving out in the near future can be tedious. Signing a long term contract at a competitive market price makes sense.
Small to large enterprises have the budgetary options of moving to a public, hybrid or private cloud.
A website on Calculating Cloud Costs lets one get a fair idea of the costs involved in Data Center Build vs. the Purchase of Cloud Services.
The primary objective of moving to the Cloud for many enterprises is to convert capital expenses to operational expenses, reduce the Total Cost of Ownership (TCO) and better enable your mobile workforce. It is not necessarily a cost saving measure as a lot depends on what options are chosen and how it is implemented.
Meeting Security, Legal and Compliance requirements in relation to data loss, privacy risks and intellectual property theft remain a concern when moving to a Hosting Service Provider for enterprises of all sizes. For large enterprises, integration with existing architecture remains a challenge.
19) Data Center – Some believe building and owning a Data Center is now old school unless you’re in the fortune 500 league. Finding suitable colocation/lease space with multi-career access with ready to use electrical and plumbing systems and avoiding facility construction is what most firms are looking at. If you would still like to look at Data Center builds, kindly refer to my article on Challenges in Infrastructure Projects.
20) Virtualization of Servers & Desktops - Implementing Virtualization for the Server Infrastructure helps. Higher staff productivity is achieved by managing 8.2 Virtual Machines (VMs) per server, compared to 4.5 VMs per server. However, the real benefit of buying virtualization software is gained when you have a large number of servers. Virtualization helps in largely decreasing the power and cooling requirements and moving towards GREEN IT.
Another alternative being seriously taken into consideration is the use of containers that make it possible to run 4 to 6 times the number of server application instances as compared to a container. A lot of Organizations are seriously considering moving applications from Virtual Machines (VM) that are fat in terms of system requirements to lightweight containers which share an operating system.
As part of an energy saving effort, one can consider shutting down end-user systems, printers and VoIP phones at the end of Business hours.
Putting in place a centralized Virtual Desktops Infrastructure (VDI) model also known as thin client for the end user has its benefits. This is ideal if most of your IT Services and Products are in the Cloud. Accessing one’s Virtual Desktop and all of your Cloud Services would then be a breeze. The added advantage of the user being able to login from anywhere and his work related data being centrally stored and automatically backed prevents the loss of sensitive data from the theft of personal devices.
21) Legacy Systems - Identifying and eliminating legacy systems that do not meet the Business needs anymore and are only used by a small fraction of the Organization is a good measure. This will help reduce maintenance costs. The challenge is to garner the support of Business Unit Heads to wean end users off legacy systems and move them to ones with newer and better Business processes.
22) Duplicate Systems - Looking for duplicate systems and software functionalities by assessing the roles and functionality of all your systems across the infrastructure helps. Added to this is the implementation of de-duplication features to address an ever increasing problem of data growth.
23) Standardization – Whether one opts to embrace an open source system or otherwise, reducing the complexity of your infrastructure by standardizing it with fewer different type of hardware and software platforms helps. Multiple hardware platforms, operating systems, applications and databases add to maintenance overheads and the need for competent personnel with varying skillsets.
Have a constructive dialogue with the Business and rationalize your application portfolio and consolidate your IT assets.
Standardization is a no-brainer and is the intent with which most IT Manager start out but in due course of time, preferred suppliers/vendors, solution experts and varying Business needs lead one astray. A periodic check is needed.
24) Embracing Open Source Software Solutions – Switching to Open Source Solutions (ones that are free of charge) with a strong ecosystem goes a long way in reducing costs.
Available Open Source options with zero costs on the Server side are:
1. Ubuntu and openSUSE for Server O/S and Core OS as a container specific O/S.
2.Microsoft Hyper-V, VMware vSphere and Citrix Xen bare-metal hypervisors have versions with limited features for small to medium sized Business while Oracle VM VirtualBox is a full featured well-developed and supported hosted hypervisor.
3.For those who would like to use Containers as an alternative to hypervisors Rocket is a viable option to Docker with limited basic functionality.
4.Apache, Nginx and Lighttpd as Open Source Web Servers.
5.Table based relational databases such as MySQL and PostgreSQL and NoSQL based databases such as MongoDB, Redis.
6.Open Cart, PrestaShop, OSCommerce as Open Source e-Commerce solutions.
and on the Desktop side are:
1.Ubuntu and openSUSE Desktop O/S.
Apache Open Office, Libre Office, K-Office and Neo Office are viable alternatives to Microsoft Office.
2.Avast, AVG, Avira for anti-virus protection.
3.Inkscape as an open source alternative to Adobe Illustrator for a vector-graphic design tool.
4.GIMP a very popular alternative to Photoshop.
The list is endless so go ahead and try an entire Open Source desktop installation through a USB stick and feel the experience.
The challenge at the Server end is to find IT personnel with the required skillset and at the desktop end, user adoption.
25) Automation – The Business looks towards IT for automation for their Business processes and so should IT for its own. Automating tasks such as patch management, end point security management, asset management among others and moving staff into higher value activities instead of making them redundant adds great value. The objective is to replace expensive labour led process with lower cost automation.
26) Internet Service Provider and Telecommunication – Constantly look for better corporate pricing plans from Internet and Telecommunication service providers. Better manage the allocation of your internet bandwidth and monitor its usage to define your true capacity requirements. Look at VoIP solutions for most of your Business needs and consider free video conferencing options available on the Internet.
27) Data Growth and Management – Effective governance of unstructured data and of its exponential growth can go a long way in reducing the time and resource required to manage it and hence, its associated costs. The lack of insight, transparency and the ability to gauge the true value of stored data across various platforms (desktop, network shares, e-mails etc.) in the IT infrastructure is where the problem lies. The solution is to put in place a Storage Service Catalogue where data is categorized based on its actual Business value, confidentiality, performance (response time and throughput), availability, type of accessibility, need for retention to meet compliance and legal requirements, disposal procedures, offsite storage and others.
This should be Tier based (call it Gold, Silver, Platinum etc.) with different service levels and highlight its related costs. That way, when there is budget crunch, IT can provide competitive storage services with various options to the Business. Also this approach would make outsourcing data storage in the future easier if need be.
An IDC Report states “the annual data volumes across the enterprise grow by 40%”. Hence, the rate at which data is growing annually in your enterprise is an important metric and needs to be tracked to keep its related cost under control.
Also, one needs to address data issues such as orphan data, de-duplication and others.
28) Business Continuity – The added cost of high availability and failover options to ensure Business Continuity is a judgement call as the difference between 99.9% and 99.8% uptime in a year is 8.76 hours and whether 10s or 100s of thousand dollars are lost during these hours depends on the nature of your Business and the criticality of IT systems.
For example, one can consider a reduction in service availability by moving an SQL Server from an active/active mode to an active/passive mode and can save several thousand dollars in terms of licensing.
The other question that needs to be answered is whether one should experience a disaster before they have an IT Disaster Recovery Plan in place and the associated costs of having an alternate site for recovery.
29) Mergers and Acquisitions – In this digital age where firms are technologically driven, the Business should ensure IT’s participation in the pre-acquisition phase of a Merger and Acquisition. Failure to do so could lead to unidentified IT risks, unplanned IT integration expenses and a lack of focus on IT cost saving opportunities. Due diligence at this stage and a proper execution of an integration strategy helps reduce IT related risks and expenses.
30) Slowing down - Last but not the least, at times it is best for IT to slow down on rolling out new technology through projects and reflect upon what exists and how existing processes can be improved. Looking at process maturity in IT Governance, IT Operations, IT Security and others through CMMI, Lean Six Sigma and others methods will largely improve IT Operations and result in providing quicker and efficient services to the end user.
While we focused above on things that should be done to cut costs, things that IT should not consider as part of their cost cutting measures include Staffing, Training, Bandwidth and Security.
Other generic cost cutting measures that firms can undertake include a freeze on hiring and salary increase, elimination of year-end bonuses, cut workers’ hours, office space and energy consumption.