The DCL Group: An IT Management Consulting Company

IT Management for the "Aughts"

By: Donna Sandorse, Managing Member, The DCL Group LLC

The turn of the century has brought with it a new austerity. In contrast to the upbeat '80's and the roaring '90's, the '00's (we like to call this so-far-somewhat-joyless decade the "aughts") has been a time of business retrenchment and sharply curtailed spending.

We are consistently told by analysts that a financial recovery will occur - unfortunately, they keep extending the estimated time of arrival. In this environment, it is critical for IT executives to reduce costs while both delivering high quality service and preparing for the long-awaited upturn.

There are a number of practices undertaken at times like these that can and should become integral aspects of IT "business as usual". These practices include IT governance, solid IT financial control and IT asset management.

IT Governance

"IT governance" is the methodology by which information technology efforts are aligned with the business strategy of a company. A rational framework should be established to determine the most effective ways to spend IT dollars.

When funding for capital expenditures is scare, it is wise for business and IT executives to work together to review projects that are on the drawing board or in the early stages of implementation. This review will allow management to triage their spending based on the business value of the proposed deliverables. Projects that will have a direct impact on the bottom line should be expedited. Unless projects are "non-discretionary" (i.e. required by regulation, avoidance of obsolescence, etc.), they should be justified with cost savings, reduced cycle times, demonstrated customer value or increased income. In all cases, these projects should be in line with overall corporate objectives.

Concrete metrics and financial analyses should be established for making these determinations - with all concerned committed to the outcomes - controlling the cost, time and quality of the deliverable as well as maintaining accountability for the projected benefits. Once established, this methodology should become a blueprint for the "boom times" as well as times of austerity.

IT Financial Control

Now is also the time to take a look at the company's model for "business as usual". Often, there are many ways to cut costs that have little or no negative impact on development - such cost controls can be used to fund the new development that will prepare an institution for the next upswing.

Invoice review and control: Making sure that the business is getting what it pays for seems an obvious first step in cost control, but research shows that it needs to happen much more often. Gartner has noted that, "the majority of enterprises that do not check their service provider bills pay 10 percent or more in excess charges." There are key places to start this analysis. Companies with large telecommunications investments would do well to understand the terms of their telecomm contracts as well as local tax and tariff structures (which are often confusing, especially if a company does business in multiple states) and actively review their invoices to ensure that they are being charged as per their contracts and to ensure that taxes are being applied appropriately. (Taxes often average 35% of the telecomm expense).
Contract reviews: Step back and analyze the technology contracts that are in place. In some cases, contracts can be renegotiated at more favorable terms - while vendors may not be readily willing to reduce charges, they may be willing to avoid the loss of a customer or to offer a discount for increased business. In cases where a company has multiple software licenses with a single vendor, or multiple individual contracts at varying rates, they may be willing to look at the overall portfolio and renegotiate terms. In such cases, it may be beneficial to consider consolidating multiple services with a single vendor, who may offer price concessions for the increased business.
Application Assessments: Existing applications may have functionality that is both beneficial and not being leveraged to its fullest extent. Projects may be underway to provide functionality that is already available in other applications. For example, "help desk" software often has available functionality for change management or asset management; security software may also have some of these same additional features. Whenever embarking on a project to select software, existing applications should be factored into the analysis to determine whether they can fill the bill. If an existing application can deliver 80 to 90 % of the new functionality desired, a serious cost/benefit analysis should be done to evaluate the expense of additional software (and all its expense should be considered - ongoing maintenance, prerequisite hardware upgrades, etc.) relative to the additional 10 to 20% of functionality.
Infrastructure Assessments: There are a variety of areas in which to avoid expenditures and/or identify cost savings within the overall technology infrastructure of a company.
- Before purchasing additional servers, review your current network environment to determine if there are server consolidations that could be done - potentially resulting in less hardware to maintain, less complexity in the overall environment and existing server availability to avoid the additional purchase.
- Undertaking a telecommunications audit may reveal untold savings. Telecomm is usually one of the top 5 expenses that a company has. It is very often the case that you have active telephone lines that are being unused. A telecomm audit should validate that all the lines being charged are, in fact, in use. Often, active lines stop being used - for example, staff move to a new location in the same building or someone moves the fax machine, but no one remembers to call the telecomm provider and cancel the line. Even if someone does cancel the line, it is necessary to follow-up to ensure that the telecomm provider has stopped billing for it.
- Make efforts to standardize and centralize in the distributed computing environment. Developing an infrastructure architecture appropriate to your needs results in savings through reduced management costs. Limiting the variety of equipment makes/models (as well as standardizing the configurations on the equipment) make it easier to manage the environment with internal staff and can cost significantly less if "break & fix" support is outsourced.

Asset Management

A comprehensive asset management process generally includes the centralized acquisition of technology equipment; equipment and configuration standards that are actively enforced; a process for establishing, reviewing and updating those standards; the maintenance of an inventory of technology equipment assets throughout the organization; and a process for the regular upgrade/replacement of technology assets. Gartner has noted that "not keeping proper track of distributed computing hardware can increase costs by 7 percent to 10 percent a year."

In many companies, the Y2K efforts laid the ground work for such a process - equipment was inventoried to ensure that it was Y2K compliant. Unfortunately, many companies did not realize the value of having this information available and current --- (and there is a substantial value to it!) --- and they have subsequently let this information become dated.

Centralized procurement of technology assets along with adherence to equipment standards allows for greater flexibility in negotiating price, contract terms and maintenance agreements for equipment. By limiting the vendor and equipment choices, there is a greater opportunity to plan for bulk negotiations (if not outright purchases). The tracking of equipment warranty and maintenance contracts limits expenditures for repairs and service that are, in fact, covered. When outsourcing "break and fix" contracts, there is an improved position for negotiations when a company knows the equipment that it has and has limited the variations of make/model and configuration that exist.

For those in charge of the company's technology, an Asset Management Process allows for greater control over technology decisions and a more proactive response to future business technology needs. When an accurate equipment inventory exists, there is no need to survey the hardware environment at the outset of every project, software upgrade or software implementation to determine if the existing equipment is adequate.

If the asset management process includes both well-considered standards and the regular upgrade or replacement of obsolete equipment, then fewer individual technology projects have to bear the expense of a major equipment upgrade. This not only improves the ability to deliver IT projects, but shortens the lead time to implementation.

From a financial perspective, a comprehensive asset management process provides the ability to track fixed asset depreciation (for purchased equipment) and to dispose of leased equipment on a timely basis. It provides the ability to plan and budget for equipment upgrades and replacements on a regular and controlled basis.

A sound asset management process also enables a company to modify behaviors related to the purchasing of equipment by implementing chargeback and passthrough accounting. Equipment is charged back to the business units in a way that makes each area accountable for its use of both distributed and centralized computing --- centralized control with distributed accountability.

Finally, tracking the physical location of technology assets enables management to ensure that these resources are not sitting fallow - that viable equipment is redeployed in lieu of purchasing additional. Given that many corporations under-utilize their technology assets and over-spend on them, an asset management process is a tool to achieve substantially higher returns on the IT investments they make.

Looking Ahead

Gartner notes that "enterprises must carefully balance the need to save money with the risk of underinvesting in IT so as not to jeopardize their ability to service their customers." It is possible to control IT expenses in such a way as to continue to allow for the funding of new IT investments, so that companies are poised to be the first out of the gate - taking advantage of the economic upturn which is sure to happen (someday).

The DCL Group • 1545 Crabapple Lane • Plainfield, New Jersey 07060 • (201) 320-2006