During times of recession, you may have to pinch pennies to make the balance sheets work -- we get it. But for this strategy to succeed, there needs to be, you know, actual balance. My plea from IT to finance gurus is to get your head out of la-la land and come back to earth -- to make decisions based in reality instead of looking solely at a magical number at the bottom of the ledger.
I'm thinking of one CFO in particular who took this thriftiness to the extreme, kicking the proverbial can down the road until it cost more in the long run. This CFO, 'Bob', has good -- if misguided -- intentions.
Servers are unnecessary
Bob entered the company at a time when the network systems administrator, who reported directly to Bob, was putting in a request for new servers to replace the old, less efficient hardware. Bob countered, saying we needed to reduce our setup to use as few servers as possible and to get back to him with a plan on how to do so.
We went to the drawing board and came up with a few proposals. We had about 15 servers at the time, and we came up with the "absolute minimum" scenario in which four new high-end servers would replace all the old ones. We were also ready with an "optimal" scenario that used a mix of new servers and old until we could raise enough money for more.
Bob thought we could go even lower. He told us to make use of two new servers and virtualization to replace all the existing servers, and he gave us enough money to buy two new midlevel servers instead of high-end units. We were aghast, telling him that if it came down to two servers, at the very least we needed high-end models. He insisted we couldn't afford it.
With little choice, we implemented his plans. It took several months to complete the project, which turned out to be somewhat of a disaster.
Users started complaining about slowness on the network. The complaints escalated, and Bob called us in to ask what had happened. The servers were new, so what was the problem?
Yes, we explained, the new servers were faster than the old servers. But the aggregate computing power -- including memory, network I/O, and storage I/O -- was slower than the aggregate of all the older servers, not to mention the overhead of virtualization even with hypervisors. Bob didn't seem convinced.
After several more weeks of user complaints and his own firsthand experience, Bob finally budgeted more money for servers. At least it was easy to migrate the virtual machines.
It pays to do it right at the beginning
Then there was the time the company had to add cubicles for new employees. The expansion meant the need to pull power and network cabling to those cubicles, which Bob said he'd deal with himself.
I suspect Bob hired the cheapest electrician he could find -- the grounding was flaky in all the cubicles. A basic outlet tester would sometimes indicate that ground was present, but other times it would be non-existent. Of course the surge protectors didn't function properly without a working ground.
One morning when the users came in, none of their computers worked. We didn't know for certain if it had to do with surges, but our hunch was yes. In fact, a couple of the computers died twice. On the second time, we could hear the power supply ticking, so we knew it was a power-related fault.
Suffice it to say, Bob gave in and hired reputable electricians to redo the power to those cubicles, and everything's been fine since. Note: This was after spending nearly three times as much to redo the wiring, not to mention the replacement costs of the dead computers.
Spare parts are clutter
Bob doesn't like clutter -- anywhere. This didn't matter much to us until he set his sights beyond his own desk to the rest of the office space, which included computers and other spare parts  in a backroom, out of sight and out of the way (or so we thought).
The systems administrator was surprised one morning to find that most of the spare parts were gone. He thought Bob might have moved them to offsite storage. Wrong! Bob had gotten rid of them entirely.
The inevitable day came when a couple of new employees needed computers. We'd once had enough hardware to cover them, but not anymore. The icing on the cake was when Bob refused the order of the typical midlevel desktop that was standard throughout the company. Instead, he insisted on an entry-level consumer-grade desktop.
Great -- the employees were using subpar machines at more cost to the company than if we'd gone with the spare computers we'd had on hand.
Savings trump safety
There was a time when Bob actually listened to us before the situation went south. One day, Bob called me in to explain offsite backups. I talked about encrypting all offsite backups, and Bob stopped me, asking why. For security, due to ID theft and such these days, I replied.
Bob let me have it, saying encryption is a waste of time and money, and it should be sufficient to throw the tapes or disk drives in a locked box at their secure offsite storage site. I made a counterargument about what would happen should this locked box get stolen: the effects on victims of ID theft, the company's reputation tarnished, and so on.
All of that was worthless -- until I told him how much it might cost if the clients sue.
Sigh. We plod on to another day, another foolish decision in the name of saving money, another catastrophe.
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This story, "A foolish CFO and the company's money are soon parted ," was originally published at InfoWorld.com.