4 Recommendations to Avoid Spending Too Much on IT

To take advantage of big cost savings in information technology, a study says businesses need to change their buying habits. Here’s how.

Despite an unprecedented trend to control information-technology costs, the majority of companies fail 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 want to minimize expenditures, but they don’t know they’re 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 too obtuse in finance.

Instead, they should become budget savvy in our economy or in case the economy worsens.

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 refresh 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 still carries market value and has 20 plus years mean time between failures.

— End of life equipment is 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 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 are widely unknown. Only 21 percent report that they have leveraged competitor third-party bids when negotiating service and maintenance contracts, while 80 percent claim they would leverage third-party maintenance if they found it to be more affordable than their current contract.

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.

Hence, an obvious conclusion:

“Every CIO should make it a priority to read this report,” says Mike Sheldon, president and CEO Curvature (www.curvature.com), 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, upgrading 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


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.

Budget Debate: Will Legislature Read Seattle News Media Headlines?

Nov. 28, 2011

The headline on the Seattle PI Web site was startling. It read: “FACT CHECK: Has Wash. cut budget by $10.5B? Hardly.”

The headline and accompanying story questioned what appear to be misrepresentations by Gov. Chris Gregoire when she claimed Washington has slashed $10.8 billion from the state budget in the last three years. The cuts were her justification for proposing a sales tax increase to balance the budget.

My hope in the budget debate is that the Legislature will read such Seattle media headlines, as they meet in a special session this week to debate the budget deficit.

(Actually, the story appeared in the Seattle PI an hour after it first appeared in the Seattle Times. But, inexplicably, the Seattle Times deleted the story less than an hour after the PI story appeared.)

Reporter Mike Baker documented how the hundreds of so-called cuts are really spending increases that haven’t been implemented.

For example, the alleged cuts include:

  • $682 million in cost-of- living increases for education employees
  • $344 million in cost-of-living hikes for pensions
  • $1 billion in education cuts, but it hasn’t really been slashed because of student tuition increases
  • $128 million for an education apportionment payment, but the payment has actually been doled out
  • $69 million for state parks, but in reality the state took in that amount from user fees

Mr. Baker also reminded us that the state is ready to spend around $30 billion from the general fund budget. That’s more money than was spent in the more-recent budget cycle.

Because it was an Associate Press story, it soon appeared on 54 media sites.

The sales tax proposal is controversial for good reason, and why the sales tax debate erupted in Washington state.

Public officials have long violated good government standards on transparency and in spending. On multiple occasions, this column has called for reform and wondered why not transparency for good, open government in Washington state?

We need better public policy – here are a couple of examples:

  • Proposing to cut $160 million from state colleges and universities is unconscionable.
  • Special interests such as the Washington Federation of State Employees should be reasonable and agree to renegotiate labor contracts.

It’s easy to conclude from the Associated Press story that Washington state has a spending problem, not a revenue problem. For example, the State Auditor revealed state government spends $1.8 million for nearly 6,700 unused cell phones is only one example. We need more public officials to create a favorable economic environment.

Given the economy and continuous budget crises, Washington legislators should finally start compromising, stop the longtime practice of shell games and launch legitimate reform. Only then, will thoughtful businesspeople and voters trust Washington state government and consider a sales tax increase.

So, in the budget debate: Will the Legislature read the Seattle news media headlines? It’s time for good government.

From the Coach’s Corner, furthermore, the state can create more tax revenue if it encourages entrepreneurship to create jobs. Here’s What Small Business Owners Need from Washington State Policymakers.

Here’s another no-brainer: How Washington Fails in Filmmaking for Economic Development.

“Government is not reason; it is not eloquent; it is force. Like fire, it is a dangerous servant and a fearful master.

-George Washington


Columnist Terry Corbell is a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complimentary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?

Secret to Success in an Uncertain Economy: Expand Marketing

Businesses are self-destructing when they cut back on marketing in downturns. If evaluated and implemented properly, marketing creates a return on investment in multiple ways.

More on that later. Meantime, suffice to say downturns or not, a good marketing approach requires intensity and is based on thought leadership about every facet from social media to internal company communications. And marketing, of course, includes strong public relations.

If anything, maintain your marketing investment and expand your PR efforts.

Sports provide great metaphors for business. As in any sport, remember this basic principle: Write a great game plan using marketing plan essentials, test your ideas and then attack…attack…attack.

An award-winning public relations expert asserts it’s unproductive to stop or trim marketing during a recession.

Devon Blaine

“Though this strategy might seem to make common sense, recessions are times that call for uncommon business wisdom,” says Ms. Devon Blaine, president and CEO of the The Blaine Group, Inc. in Beverly Hills. “Recessions reward the aggressive marketer and penalize the timid one.”

In other words, timorous businesses forego opportunities for niche leadership and to expand their market share.

Authoritative Study

Ms. Blaine cited a noteworthy study, “Advertising & Marketing During An Economic Downturn,” by David Stanley of Industrial Equipment News. It analyzed the situations of more than 1,000 manufacturers in what’s called “Profit Impact of Market Strategy” (PIMS).

Far too often, studies appear to be self-serving for special interests. But this study is objective and unique. It’s from The Strategic Planning Institute in Cambridge, MA, which describes itself as a non-profit membership association that promotes “strategic business management.”

Actually, The Strategic Planning Institute originated as an internal planning project at General Electric. Then, from 1972 to 1974, it evolved into a Harvard Business School project.

The PIMS study concluded that bold marketing in a downturn resulted in strong performance while tepid marketing had undesirable consequences. In addition, the higher marketing investments did not hurt profits for the short-term.

1990’s lessons

“Penton Research Services reports that shortly after the 1990-91 recession, Coopers & Lybrand, in conjunction with Business Science International, surveyed CEOs from growth companies about the effect the recession had on their profit growth and the actions they had taken in response,” cited Ms. Blaine.

So what were the conclusions from the second study?

“A strong marketing program enables a firm to solidify its customer base, take business away from less aggressive competitors, and position itself for future growth during the recovery,” she concluded.

Again, I agree with Ms. Blaine. Having experienced five major economic downturns in my career, I know there is one inescapable fact about marketing and recessions. Companies that view marketing strictly as an expense and not an investment miss opportunities for growth. Successful companies look at the short and long-term ramifications.

During downturns, good companies that cut marketing budgets soon learn they do not retain dominance in their marketplace, and they will learn they have lost market share once the upturn begins.

My thanks to Ms. Blaine for contributing her expertise.

(Disclosure: Ms. Blaine is a talented friend who was named the southern California publicist of year for her work in professional PR and crisis intervention. We have also been members of Consultants West, a roundtable of veteran consultants in Los Angeles.)

From the Coach’s Corner: Not to be redundant and to add to Ms. Blaine’s astute points, here are five lessons I’ve learned about marketing and recessions:

  1. A quality company that maintains stellar marketing in a recession succeeds. But it is imperative in the worst of conditions to continually evaluate the company’s marketing return on investment.
  2. If a company does not provide enough value or is a substandard company, marketing does not help them.
  3. An economic downturn is a terrific opportunity to take a big picture snapshot of a company. It is important to look a client’s total situation – such as in human resources or pricing – and come up with solutions.
  4. The best companies are proactive about planning and execution in good times and bad. Many companies show poor judgment about pricing and cost-cutting in marketing. Automatically slashing prices without assessing the competitive landscape can undermine your brand’s value, and make it difficult to successfully raise prices later.
  5. Companies that cut marketing investments fail to sustain their “Top-of-the Mind Awareness” and unnecessarily lose revenue in the recessions, and they endanger their profitability when economic conditions improve. Indeed, it takes more resources – time, energy and money – because they have to work too hard just to re-establish their brand.

Here are related resource links:

“Unless we change direction, we are likely to end up where we are headed.”

– Chinese proverb


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.

Seattle business consultant Terry Corbell provides high-performance management services and strategies.