IT Cost Management

IT Cost Management

The top 5 ways to cut your IT costs.

Lately, a lot of companies are having trouble paying their bills. As a result, they’re trying to trim the fat in every department. Obviously, IT is no exception.

But where is that fat to be found? In many cases, the sophistication of a company’s databases, servers, and software can be directly correlated to the company’s ability to serve its customers. And it’s not as though most firms can reduce the number of employees in the department; most are already operating with a skeleton crew.

So any belt tightening must be done strategically. Some companies may have the expertise in house to figure out a more efficient way to operate. Others would do well to bring in a specialist. The idea of paying an outside provider for advice sounds paradoxical when times are tough, but Rita Strauss, central region dynamics channel manager at the Bloomington office of Microsoft, says companies can realize a significant and often speedy return on that investment.

Where to begin? We asked local experts for their thoughts. They named five key areas where IT departments may be able to reduce costs and stay competitive during these hard times.

1. Analyzing Existing Resources

The first step to making the IT department more efficient is to take an inventory of its resources. “To help the customer save money, assessments are absolutely paramount,” says Dave Lindblom, a partner at Mocha Data, a Plymouth-based IT consulting company. “If you don’t know what you have, how do you know where you are going? We’ve come across numerous customers that would be thinking about adding a bunch of servers, when in reality they already had enough servers. To avoid that kind of thing, we come in and take inventory. Then we set out to understand, right down to the megahertz, what they need in terms of memory and everything else. From there, we can help them build a three- to five-year plan.”

He reiterates that good advice is paramount. Spending a few thousand on consulting is far better than buying $800,000 worth of servers and not using them.

Phil O’Konski, vice president of integration services at Midwave, an Eden Prairie IT services firm, says the average server at a business is only about 5 to 10 percent utilized. This happens because many business applications require their own operating systems, and one of the easiest ways to provide them is to allocate a separate server. All that extra space costs money because it drains electricity, saps efficiency, and requires people to maintain it.

Consultants may be able to help re-engineer a company’s systems to better use current capacity. They may also be able to train internal IT employees so that they have a fuller understanding of their systems’ capabilities.
“That’s always been an issue within organizations,” Strauss says. “They don’t continue to invest over time in understanding the systems that they have and how to leverage them better. If they did that, they would be more efficient.”

2. Cloud Computing

With cloud computing, a portion of a company’s computer hardware, operating systems, and software are not held on site, but are accessed through the Internet. (Read “In the Cloud” on page 76 to get the full story on cloud computing.) Companies subscribe to cloud computing services in order to access common business applications via a Web browser. The software and data for the applications are stored on the provider’s servers, wherever it is most efficient to keep them, and are accessed dynamically as needed.

Subscribing companies have at their disposal all the power of the provider’s data centers. Many experts feel that cloud computing is especially appropriate for large but infrequent tasks that would require businesses to invest in infrastructure that they otherwise wouldn’t need, but cloud computing can be used for everyday tasks as well.

Cloud computing rejiggers budgets in a dramatic way, O’Konski says. “You also reduce other costs that aren’t inherently within IT, like facility costs—power, cooling, heating, space leasing, and so on,” he explains. “The cost equation for IT doesn’t necessarily have to come directly out of an IT budget. It can come out of other budgets, from a facilities perspective.” And when it’s time to grow again, the business can grow virtually instead of physically.

3. Removing Redundancy

Most of the files a company stores contain chunks of data that are identical to data in other files—think of e-mail file attachments, or forms that all contain the same fields. The identical portions are stored over and over, as part of the files that contain them. But through a process called data deduplication, the identical portions can be referenced instead of repeated, saving massive amounts of space and vastly reducing backup time.

How big an impact can this have? Companies are in the habit of generating data at a stunning rate. They buy more and more storage to accommodate their corporate networks and their data. With deduplication, they can reduce costs and avoid new purchases.

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“It can reduce the amount of data you have to back up anywhere from 20 to 80 percent, because this technology recognizes that a lot of these files look the same,” O’Konski says. “It doesn’t need to back up the bit or block the same way over and over again.”
Mocha Data uses deduplication extensively with its clients because of the excellent return on investment. John Conlin, a partner at the company, says that a client that used to store 10 terabytes of data will often find itself with only three.

“It depends on the product we use, but the ROI for this kind of infrastructure is always less than three years,” he says. “Usually, it’s less than 12 months.”

Lindblom explains that a conservative number for powering and cooling a server for a year is $3,000. So if deduplication allows a company to remove, say, 94 servers . . . well, it’s enough to make the finance department click its heels.

4. Better Employee Management

As we’ve seen, deduplication and cloud computing both can reduce IT staffing needs. That may mean companies can avoid additional hiring during growth periods. But Lindblom says it doesn’t usually mean they can lay off existing personnel. Most IT departments are operating at about 125 percent of capacity, he says. If there are fewer servers to monitor, it just means that the IT manager works a slightly less ridiculous amount of overtime.

So staff-related savings must come from other corners.

Genesis10, a business and technology consulting firm based in Woodbury, offers a consulting service designed to help clients make the most of their IT employees.

“We go in and review an IT department’s overall team and identify where certain resources are over-skilled,” explains business development executive Varda Nauen. “We find alternative growth opportunities for the more senior people. Then we look to identify more junior talent that would be a cost-effective way to help build their next-generation work force. As an example, on a large ERP [enterprise resource planning] project, they might have a very senior person or an expensive consultant working on basic project-coordination duties. Those are things that could be done by somebody less experienced.”

The cross-training portion of the program is vital, especially when companies are trying to avoid layoffs. “We see this a lot,” Nauen says. “There’s a lot of movement internally. People who are not subject-matter experts in a certain area are getting that training so that they can preserve their jobs. Rather than replacing people, companies are redistributing the work.”

The big outsourcing wave has mostly come to an end, O’Konski says. Outsourcing was good at eliminating human resources costs, but it was inflexible. Any changes to the IT environment tended to be costly.
“There’s a new idea called multisourcing,” he says. “You have multiple vendors who are specialized in certain areas to provide some of your niche services. It allows [the internal] IT department to focus on their core business and the things they need to help them run the company.”

5. Staging Projects

The final suggestion is not revolutionary, but it’s still a good point: Don’t cancel projects, just stretch them out over a longer time period.

“In order to continue to meet deliverables, a lot of our clients are staging projects,” Nauen says. “They’re not trying to do everything at once. There are a lot of postponed projects, a lot of slowdowns. There’s a lot of development, as opposed to deployment phases.”

While that’s not what anyone really wants to hear, it still moves businesses closer to their long-term goals—and that’s good news.