Photo by Erwin Pieloor

Actionable steps to optimize your IT spending.

 

To optimize your spending on information technology, start with a comprehensive audit to cancel any unused subscriptions, eliminate all duplications, and negotiate lengthy contracts with third-party suppliers.

In addition, optimize your cloud costs, use an IT Asset Management framework in order to track hardware lifecycles, automate with artificial intelligence to free up personnel, and embrace open source options to lower your licensing fees.

Failures to control costs have been a major corporate headache for many years.

 

Failures to control costs have been a major corporate headache for many years.

 

Despite an unprecedented trend to control IT costs, the majority of companies have failed to achieve maximum savings, according to a multi-nation Forrester Consulting study.

“After surveying 304 IT decision-makers, Forrester found that even though IT budgets are under constant scrutiny, businesses have defaulted to vendor influence which has blinded them to the rewards of extending hardware lifecycles and third-party maintenance solutions,” according to the 2013 report.

Seventy-six percent of respondents wanted to minimize expenditures, but they didn’t know they were overpaying in the two ways. Little wonder why the top IT decision-maker for many companies is not the chief information officer – the chief financial officer is.

Many CIOs are still too obtuse in finance. Instead, they should become budget savvy. In essence, CIOs should learn how to get more respect in the C-suite.

The Forrester study is entitled, “Challenging The Status Quo On Maintenance Contracts And Refresh Cycles To Lower Costs.”

More key findings:

— Up to 79 percent of organizations refreshed their wired networking infrastructure every one to five years guided by industry averages that originate from the vendors.

— Vendors set the end of life agenda resulting in the sometimes unnecessary and expensive replacement of IT equipment – that carried market value and has 20 plus years mean time between failures.

— End of life equipment has been prematurely retired. Eighty-five percent of respondents admitted that they would have kept their legacy networking equipment if the vendor continued to support it.

— Original equipment manufacturer maintenance services have had little return on investment. More than 80 percent of organizations buy maintenance contracts from their equipment manufacturer even though they see little value in what they are purchasing and express discontent over misrepresented cost savings, new fees, and inflexible pricing models.

— Third-party maintenance options have been widely unknown. Only 21 percent reporte that they have leveraged competitor third-party bids when negotiating service and maintenance contracts, while 80 percent claimed they would leverage third-party maintenance if they found it to be more affordable than their current contract.

The report’s recommendations:

  1. Keep what’s working within an existing infrastructure to avoid premature and unnecessary upgrades.
  2. Don’t pay for software updates if there are none, or if they are available for free. Organizations should carefully scrutinize ongoing maintenance contracts in order to find valuable operational expenditure savings.
  3. Put maintenance contracts out for competitive bid, not just to different resellers, but also include third-party options.
  4. Put metrics in place to reward value, quality, and longevity, not just resiliency.

The survey’s methodology: Interviews were conducted with IT decision-makers in Australia, France, Germany, India, Japan, Singapore, the United Kingdom, and the United States.

Respondents included decision-makers in executive positions, finance, information technology, and procurement.

Obvious conclusion:

“Every CIO should make it a priority to read this report,” said Mike Sheldon, president and CEO of Curvature, formerly Network Hardware Resale, which sponsored the study.

“Businesses of all sizes need to know that there can be incredible value and cost savings with a reliable third-party maintenance service provider – helping to ease worries about tightening IT budgets without sacrificing quality,” he adds.

Amen. Review your overall business situation, how vendors are selected, and continue to look for ways to upgrade solutions, end-of-life and maintenance.

From the Coach’s Corner, editor’s picks for related reading:

Two Studies Indicate Need for IT Pros to Get Businesslike — CEOs have long complained to me about information technology. They complain about high-priced consultants, and that IT projects are too expensive and fail to yield a return on investment. Indeed, two studies underscored the need for IT professionals to become more businesslike.

Risk Management – Picking the Best Cloud Storage Provider — Choosing the right cloud storage provider is a must for risk management. You have a vast array of options. Cost is important, of course, but so are your company’s risk-management needs – just like the federal government.

Do BYOD Headaches Outweigh Benefits? Yes — More than half — 53 percent — of surveyed global businesses admit they’re not ready to defend against attacks on their employees’ bring their own device (BYOD) devices. Nearly all say their devices might have been attacked.

“Beware of little expenses. A small leak will sink a great ship.”
-Benjamin Franklin

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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.