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How do you cut $7 Million from your IT budget? The same way you eat an elephant, one bite at a time. After 20 years of helping companies manage their Infrastructure Technology (IT), I’ve seen too many companies go into paralysis when faced with major cost cutting opportunities. Most will tackle the low hanging fruit, but once that’s achieved and only the “large effort” cost savings opportunities remain, paralysis sets in. I’d like to challenge businesses to take a long-term approach to cost reductions instead of the quick and dirty cost cutting I see so often. By taking a long term approach you are able to injects controls over technology spending and ensures maximum returns on your IT dollars.
Let’s look at a real life example of how this can be done using server consolidations. The low hanging fruit many companies embrace is to consolidate servers using two basic strategies: consolidating small applications onto single departmental servers without implementing any type of virtualization technology. (Yes, some small applications will play nicely on shared departmental servers). The second strategy is to implement virtualization where high-end servers are deployed and software is installed on them allowing the hardware to be carved out into smaller “virtual” servers. This enables one large server to be used more efficiently than several small servers. Each virtual server configuration is allocated based on application demand instead of hardware configurations established by server vendors. Both these approaches can be done with relative simplicity and minimal effort resulting in tremendous cost savings.
There is a third consolidation strategy that is where most companies experience paralysis. It is the most complex and the most avoided approach to consolidation; that is Application Rationalization. Many companies have grown through mergers and acquisitions, others companies have operated for eons without a centralized IT department and consequently many businesses operate duplicate or “like” applications throughout their enterprise. Take a look around your organization and see if you have two or more of these types of applications running;
o Financial applications – Are different business units or remote sites using their own financial applications?
o Document Tracking (Imaging) systems – Do you have Engineering units at different locations using different vendor’s products to develop and track their Engineering documents?
o Manufacturing systems – Do you have more than one manufacturing site and do they use corporate “Enterprise class” systems or do they have their own flavors?
o Time Clock systems – Do you have different time-clock systems at various sites?
The cost and effort to consolidate (or rationalize) applications can be overwhelming. This is where I see companies freeze up like someone staring at their elephant dinner. The typical response I get from IT is “this is going to take years and I don’t have the staff or funding to tackle this large an undertaking”. Wrong! This is where a long-term view comes in to play. A project of this magnitude is done in phases… one bite at a time!
Here are the simple steps to develop your 5 year plan to eliminate excess costs from running duplicate systems in your enterprise.
1. Determine priorities – Pick one application to start with. Identify which application will support your company’s business objectives the most and start there.
2. Develop the budget – Determine what this consolidation project will cost in terms of hardware upgrades, software upgrades, network upgrades and temporary staffing, vendor and/or consulting fees.
3. Determine the return on investment – How much will your company save over the life of the systems? This should be actual dollars in terms of hardware, software, vendor support fees, consultant fees etc over the lifecycle of the system and compare these costs with the projected costs of operating in a consolidated environment.
4. Formally set aside funding (or request funding to leadership).
When you’re done with steps one through four, repeat the process starting at step one again. Pick the next application to consolidate and go through the same process for the second application. Depending on the size of your organization and the size of the project budgets, senior leadership may choose to fund more than one project at a time.
You now have “year one” of your multi-year plan complete! Now go back through steps one through four of the remaining environments where you have duplicate applications and develop the rest of your multi-year plan.
There is no reason for companies to live with excessive costs associated with running duplicate applications. There’s also no reason to be frozen by paralysis gaping at the size of their opportunities. By taking a long-term view of technology spending, companies can take their first bite out of their elephant budgets and begin their journey to cost reductions and technology efficiency.