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.

Eye-Opening Options to Generate Soaring Profits

Here’s a question from a reader:

Q: Despite my hard work and advertising, my small company has not been faring well financially. Help!

A: A company performs well by employing strong marketing programs as well as maintaining efficiencies in the control of costs, performance and quality. So, there could be a myriad of reasons for your demise, including competition, lack of proper focus, and poor employee performance.

Shy girl Free PhotoNot to oversimplify, but here are four areas that warrant your attention:

— Expenses

— Too much focus on revenue

— For talent, strategize to recruit mature workers

— Big picture planning

Expenses. You don’t indicate how many workers you employ, but the first area on which to focus is your ability stay in business.

So focus on expenses without looking desperate.

The key is to cut where you can without appearing to do so, and to determine your break-even point.

Until you have reason to be confident, fake it until you make it. Act with conviction and customers and vendors will remain confident in you.

Sometimes hiring or outsourcing work to independent contractors are the way to go because they’re more experienced and require less supervision, and they do not require health insurance or other benefits.

For many job descriptions, interns can be beneficial. But if you don’t pay interns, make certain you adhere to applicable laws and regulations. You don’t want to be accused of exploiting them for profit gain.

And, there is wealth of software that helps small businesses to function.

As for your location, determine where you can economize. Can you move your business into your home or into an executive suite, which can be rented by the day or month? You’ll get secretarial help, such as a receptionist or telephone answering services and photo-copying.

Many professional firms sub-lease or rent out their extra space. Conversely, perhaps you could rent out your extra space.

…four areas that warrant your attention:

— Expenses

— Too much focus on revenue

— For talent, strategize to recruit mature workers

— Big picture planning

What about your loans? Can you consolidate your loans for vehicles or equipment to lower your payments?

Implement the step-by-step solutions for a company turnaround.

Too much focus on revenue. Sometimes entrepreneurs find themselves focusing on how to make money when that’s really the desired result, but management behavior doesn’t match the goal of being profitable. They reactively cut prices to generate volume without considering other solutions.

And cutting employees without enough focus on other sales and customer service are often premature.

You need to find customers who want your products and services. Give them reasons to keep coming back. Give them the right incentives to refer other customers to you. And don’t forget to make your business fun.

Companies succeed when customers come first by creating a happy buying environment. This accomplished when you start with the point of customer contact. You must have competence in telephone answering – a skilled receptionist, who is great in business etiquette and in solving of problems.

Make certain customers get prompt responses and don’t screen your calls. How many times a day does your receptionist say these words: “Can I say who is calling?” Customers don’t like to be screened out.

Consider the elements needed for your customers’ satisfaction. Low prices only represent a small percentage of their satisfaction. Customers appreciate fast, responsive and knowledgeable customer service.

My research shows customers will start buying from your competitors when they feel taken for granted by you or your employees. That’s true in 70 percent of cases when customers buy elsewhere.

Only about 18 percent of consumers are so price-conscious they only buy products or services at the cheapest price.

So, target the customers who appreciate value in other ways: The diligent work of your staff, your strong business image in the community, convenience, and a reasonable price.

Here are the 10 best marketing tips for growth even on a tight budget.

Never stop marketing. Invest 20 percent of your time and resources every day. Give adequate thought on how much money to invest. For more on marketing, see the secrets to success in a weak economy — expand marketing. If you’re frustrated in looking for clients, soften your approach.

If you take such precautions, you will distinguish yourself from the competition.

Recruit mature workers. They are a source for experience and stability — in human resources, slow motion gets you there faster. Employer turnover and poor recruitment are detrimental to controlling costs. Research from employment services company Manpower Inc. in 2007 indicated many companies don’t have a good understanding of employee recruitment.

In particular, it seems that 78 percent aren’t concerned about the graying population and its impact on the retaining of good workers. Some 28 percent don’t have a strategy for keeping their workers past the age of retirement and 18 percent aren’t planning to recruit such mature employees.

The temporary help firm suggests several best-practices in hiring, such as training programs to increase skills, flexible scheduling or job-sharing, and new job descriptions to accommodate candidates who can bring value to the company.

Big picture planning. Budget time on a regular basis for “blue-sky” planning. In other words, make the most of your free time. Even the most harried entrepreneurial manager can make time to brainstorm. Use the white space on your calendar to connect the dots between your personal and business goals.

Hint: Think 1930s for business success. Consumer attitudes are changing.

Consider whether you need to make fundamental changes, alter your business structure, fine-tune components, or to inspire confidence in customers and employees.

Thinking outside the box is a bit of a tired, over-used phrase, but it’s still apropos. Consider the principle of “contrary action.” Take contrary action in all that you do. In this way, you’ll learn to keep an open mind. Then, focus on areas in which you’re passionate.

Become known as a leader in your industry. But don’t make the mistake of failing to learn principles from others outside your profession. Read biographies of successful people and learn the reasons why they solve problems and create opportunities for growth. And, network with professionals outside your particular industry.

Study your competitors. How do they differ from you? Think like a customer and take out a pen and paper. Determine where you fall short and what you need to do for improvement.

When facing a stressful problem, remember this one basic principle: There’s at least one event in your past that has prepared you for this challenge.

From the Coach’s Corner, by the way don’t forget about developing an exit strategy now

“Profit in business comes from repeat customers, customers that boast about your project or service, and that bring friends with them.”

-W. Edwards Deming 


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.