Our current topic is ever present in today’s economic climate: cost reduction. This is the third post on this critical area. Despite some willingness by companies to invest in IT (while there is a reluctance to invest in staff), IT must also deliver efficiencies. This is the second post on the near term tactics that you should employ to deliver the required cost reductions and efficiencies. As I mentioned previously, first ensure you understand the business drivers behind the cost reduction so you can appropriately shape your program to meet those needs.

Assuming you have that understanding, I recommend 5 near term areas that should provide real savings and also tighten up your organization to make it a leaner and more effective shop. The first area to tackle is what you spend on vendors and services or third party spend. This is covered in the previous post. The second area to tackle is making sure you have a ‘clean’ shop. Invariably, unless you have world class inventory and lifecycle processes, you will be able to save 1 to 3% of your budget by cleaning up. So, what is a ‘clean shop’?

A ‘clean shop’ is one where you are in control of all of your assets from PCs to mobiles to telecomm lines to software. Let me relay an interesting example of what was found through cleanup efforts. The first one was during a full data center cleanup, and not only did we find plenty of legacy server and telecomm gear that was little used or perhaps not used in 6 or even 18 months, but we uncovered DS-3 circuits that were live but no longer in use that the company had been paying for for the past 8 years! Typically, the larger the company, the more cleanup to be had. Start with making sure your inventory processes actually work, and not just the commission process but probably more importantly, the decommissioning process. Assign a small SWAT team to work your major corporate sites. Their job should be to go into every major site and sweep it of legacy, unused equipment. You may have endusers hoarding equipment no longer used in the hopes that they might need it for a new employee. If so, make sure your billing and processes do not penalize them to turn the stuff in. Hold an amnesty day by site. Publicize how much was collected and how much the company will save on maintenance, property taxes, and so on. Make sure your SWAT decomm team takes care of completing every decommission task, including getting the inventory updated and getting the decommissioned items off your vendors’ maintenance bills.

With the decommissioning processes corrected and the sites starting to be cleaned, go broader. Tackle your data centers. You should walk a few of them. If there is old equipment and boxes piled around, you have excess inventory that is costing you. Ensure your engineering teams know they must run a ‘clean shop’. Again, assign a SWAT team to decomm with server, network and storage engineers represented. Have someone from your finance team participate, you may up with required writedowns on equipment no longer in production but still on the books. That is fine, if the company is in cost reduction mode, there are invariably writeoff mechanisms for the corporation overall. And remember, for every server or device you unplug, you will get power and cooling savings.

Next, go after the user equipment, but partner with your business unit CFOs. Develop and give the the business units some nice reports that show how many users have two PCs (or more), how many have two cell phones (or more), how many home lines (even ISDN in this day and age !) that the company is paying for, and how much their business unit can save by getting rid of the excess equipment and inappropriate services (e.g., only the CEO should have the line to their house paid for). But make sure you have run a quick report on IT and you have your house in order. And make sure that when users start turning equipment in, you can decommission or reuse it effectively and it comes of their internal bill or costs.

Last, but not least, tackle software licenses. Most often the case is that you are over-licensed — all those PCs turned in mean you can recycle their software licenses for new users. And you may find you are paying maintenance for old  software that is not used, or the maintenance assumes a much higher number of devices. Software asset management is a very complex and consuming area, but it is also an area where IT shops spend significant sums.

So, by cleaning up your IT assets, and putting in place good asset management processes, you should be able to save at least 1% to 3% of your annual budget. In the next post we will discuss the 3rd near term cost reduction tactic to employ — with staffing, but not in the manner typically implemented.

Have you tried any of the ‘clean shop’ techniques? What were the results? Any practices that really improved the results?

Best, Jim