Believe it or not, now's the time to spend. Here's how you can use technology to do more with what you already have.
Back in the good old days - and by that we mean last year or the year before - organisations worried less about how much they were spending on technology than about how many implementations they could squeeze out of their exhausted IS staffs. Big, expensive projects such as CRM, e-commerce and ERP were the order of the day.
Today it's a new world, marked by global uncertainty and hard economic times. And as the economy goes, so goes IT spending. Those free-wheeling days have all but vanished, at least for now. "In recent months executives and CFOs have focused on the fact that their top line isn't growing, and they're looking to sustain the bottom line by reducing the expenses," says Ryan Schmelz, managing partner of Transition Partners, a Virginia-based management consultancy.
Those reductions have certainly hit technology budgets, and hit them hard. A recent study from Meta Group (US) projects that total technology spending will decrease by 2 per cent in 2002, compared with an 8 per cent increase in 2001. Half of the surveyed CIOs have reduced their budgets, and 40 per cent of respondents reported reductions of 20 per cent or more. "In the late 90s we were in an exuberant technology economy, in times that were flush with cash and opportunity," says Howard Rubin, Meta Group executive vice president and author of the report. "Now IT spending has gone from exuberant to reactive to hyperreactive."
"Decision making has changed drastically" in the face of the economic downturn, says Tal Moise, vice president of business innovation at Clarian Health Partners, a health-care company in Indianapolis, where new technology investments now go through a more stringent review process. "Holding business units accountable has driven down the requests for new technologies," adds Moise. Eighteen months ago the review board might have considered buying a flashy new piece of technology that didn't guarantee an immediate ROI, but these days the company is sticking with offerings that fit into the strategic plan and come from established players.
But while your company may be understandably reluctant to invest in new technology, it's important to realise that some judicious IT spending can actually save money in the long run by driving costs out of the IT infrastructure. The mantra here? Use technology to do more with what you have.
One: be a bandwidth miser
If a company network is like a three-lane highway, think of the data trying to pass through the network as a car. And when too many cars try to cram into those three lanes, well, you know the deal.
Such traffic jams are all too common, says Jerald Murphy, a senior vice president at Meta Group. "Bandwidth is generally managed poorly by companies," he notes. Not only do organisations pay for bandwidth that they aren't going to need, but much of the data that travels over company networks is repetitive - up to 70 per cent of data, according to Peribit, a California-based vendor of bandwidth improvement technology.
The common method of solving data jams has been to simply widen the highway by buying more bandwidth, a costly and wasteful practice. Although a new T1 line is relatively inexpensive, its monthly maintenance fee is another story. For example, Murphy figured out that the monthly costs for upkeep and maintenance of a typical business circuit would run between $US800 and $US1500.
Instead of throwing more money at the problem, Matt Kesner, the CTO of San Francisco-based law firm Fenwick & West, opted to find software that helps better manage the bandwidth he already has. Such software falls into two main areas: congestion management and congestion avoidance. Congestion management means prioritising data moving over the network, so that the most important stuff gets through first. The software allows an IS organisation to set up rules that govern the order in which data travels, similar to the way that an ambulance toting a heart attack victim along the highway is given the right of way. For example, data could be prioritised so that electronic greeting cards always get dropped from the queue, or text e-mails always move quickly while streaming video waits.
Congestion avoidance involves compressing data - making it small enough to move more quickly.
The attraction of bandwidth management is that it allows organisations to defer expensive infrastructure changes, according to Murphy. What does that mean for savings? "As with everything in life, it depends," he says. "But most of these vendors calculate a return on investment at three to five months. So if you spent $US20,000 on a device, you might expect a saving of $US100,000 a year."
At Fenwick & West, Kesner has implemented Peribit's data compression software. (Peribit's technology uses molecular sequence reduction technology - the same technology used in DNA research - to find, locate and eliminate data repetitions.) Kesner says that the technology has tripled the capacity of the company's T1 line and reduced traffic by 70 per cent, allowing him to defer the purchase of new lines.
Two: manage your desktop smarter
Desktop management is one of the areas most ripe for IT savings, says Norbert Kriebel, a senior industry analyst for Giga Information Group (US). Why? Because the first step to smart desktop management doesn't involve any new purchases. Kriebel contends that organisations need to standardise their desktops - that is, make sure everyone in the organisation has the same version of Windows, or the same e-mail system - before doing anything else. "The more varied the desktop, the more expensive it is to manage," he says. He estimates that companies can knock at least 10 per cent from their IT budgets just by standardising desktops, and that most organisations can save more than $US1500 per desktop annually.
Beyond standardisation, there are desktop management products that manage the life cycle of a computer. Such software can distribute and upgrade applications, offer help desk support, update virus definitions automatically, and diagnose and repair desktop problems. The savings from these products come in a few different places, Kriebel says. First, quicker distribution of applications means the ROI on the cost of new applications comes sooner. For example, let's say a company has purchased new accounting software. If the IS department has installed it on some desktops but has not got to all of them, the new software will take longer to produce a return on its investment. In addition, the accounting department is likely spending double the necessary time juggling the old system with the new system.
Second, desktop management, when used correctly, keeps IS people from spending their time physically going to each desktop; that means that the organisation can either make do with fewer IS employees or reallocate the talents of the IS department into more productive endeavours.
Altiris, one of the vendors offering desktop management software, has an ROI calculator on its Web site, where companies can plug in factors like the number of computers they manage and come up with a number that represents potential savings. A note of caution, though: Giga's Kriebel points out that if organisations skip over the standardisation part and go right to purchasing a technology product, they are unlikely to see stellar results.
Three: pinch pennies with network policiesAnother place to shave off some budgetary fat is by adopting a practice called policy-based network mana-gement (PBNM). The idea behind PBNM is that it forces companies to set rules, or "policies" that dictate which users, departments or applications deserve network priority at which times of the day. The software sets up the network to behave in accordance with the policies, allocating resources to the most critical departments and applications, and alerting the IS department to unexpected spikes in usage. A network administrator using one of these products might, for example, allocate key network resources to the company's CRM applications during the times customers would be most likely to contact the company.
The process is invisible to the user, according to Martha Young, research director at Enterprise Management Associates, a Colorado-based analyst company. "They will see their business applications being more efficient and snappy, while the downloading of MP3s will be excruciatingly slow."
Most of these products are fairly easy on the wallet; according to Young, an investment of $US4000 to $10,000 is enough for most companies to get started. Savings start to appear when critical applications operate at their peak performance - in other words, you'll save money by getting your current technology to work better. "By prioritising applications, the costs associated with the expense of unplanned bandwidth expansion, the disruption involved with installation and the diversion of attention of the IT folks from strategic planning to tactical are avoided," says Young.
Four: get stingy with your storage
Storing data is rather like storing household possessions. If the closets are stuffed to capacity with all sorts of things - shoes, tennis racquets, boxes of cereal - it's hard to find what you need. On the flip side, if you have five closets but need only two, you're wasting space. It's the same with data. Most organisations have pretty messy closets. In fact, the practice of wasting storage is widespread, according to Mike Karp, senior analyst at Enterprise Management Associates. That's why smart organisations are turning to storage management software to use their storage more efficiently and avoid wasting money on unnecessary storage disks.
"Most of the disks out there are less than half full," says Karp. He estimates that although a disk costs only about $US1000, the software to run and maintain each disk costs six to eight times that - and even smaller organisations have storage maintenance costs that run into the tens of thousands of dollars.
To guard against needless storage costs, vendors offer software that manages both data quality and data quantity by helping companies find out what they're storing, get rid of unnecessary data and consolidate what's left. The result can be dramatic savings in both time and money.
Just ask Jeffrey Slapp, manager of network and information systems for the Penn State Hospitality Services, which employs 1100 people and manages two hotels and a conference centre for the university. Slapp relies heavily on WQuinn's Storage Central software to find and remove thousands of duplicate files, filter out files that university policy disallows (such as MP3 files) and ensure that users aren't going beyond their allotted quota of storage space. Without the automated storage management the product provides, Slapp says he would need another full-time IS employee. He estimates that the time savings from not having to manage storage manually "is weeks, if not months, a year", in addition to the money he saves by buying fewer storage disks.
Five: scrooge it up with your ISPs
While internal network performance lies under the purview of network administrators, Internet performance, frustratingly enough, does not. That job falls to the border gateway protocol (BGP), a 20-year-old standard for transmitting data over the Internet. BGP's shortcoming is that it always chooses the shortest route for data to travel - rather than, say, cheaper or faster routes. The only way for companies to ensure that BGP provides good performance is to pay for more service than is necessary - usually spreading the job among a few different ISPs - to make sure nothing falls through the cracks.
A few new technology companies are working to change that need with something called Internet route control. These companies - NetVmg, Opnix and RouteScience - offer route control devices, which are pieces of hardware that check out available Internet traffic pathways and choose the one that makes the most sense according to customer-mandated parameters.
Savings come in the form of decreased monthly bandwidth costs. Customers also get reports on the ISP's performance from the route control vendor. These reports give companies a handy negotiating lever when it comes time to re-up the ISP contract. "It's the first time that the actual enterprise can give a report card to the service provider," says Jennifer Liscom, principal at Gartner.
Most of these technologies are fairly new, and customer trials are still under way, but RouteScience says that a company with a current monthly bandwidth cost of $US157,000 that buys its top-priced $US250,000 device will see monthly savings of more than $US31,000 and a payback in seven months.
The technologies here aren't automatic cures for IT budget woes. In some cases the savings aren't even all that easy to calculate, since their advantages lie in their ability to let IS departments do more with what's already in place. "IT budgets are really tight," says Jamie Gruener, a senior analyst at The Yankee Group, a technology research and consultancy in Boston. "Companies need to figure out how they can better leverage what they already have in place." In an uncertain economy, that's an important first step to saving money. But if you're meeting for coffee in the company cafeteria, bring along a few bucks. They're charging for the lattes these days.
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