At the beginning of November, the Government unveiled an ambitious plan to make savings of £1.4 billion on the £14 billion it spends on information technology every year. The public statement outlined how it would be achieved: there would be a greater emphasis on standardisation and less reliance on outside consultants. It would also look at what information and systems - such as human resources and finance - could be shared across departments.
Given the Government's track record in deploying IT systems, the review is long overdue. During the 1980s and '90s, more projects were outsourced to big consultancies, with some of the biggest contracts going to Texas-based EDS. But many of these have turned out to be financial and operational disasters, evidenced when EDS lost the Inland Revenue contract in 2003. Other systems, such as that at the ill-starred Child Support Agency, have never managed to operate successfully.
But is the Government that much worse at IT than the rest of industry?
Could the private sector just as easily shave 10% off its IT budgets? MT asked those working in the business to come up with some money-saving tips. Dozens of people from all areas of IT made their contribution and we have assembled 10 sure-fire ways to cut costs. Most of them will even help you work more productively, to boot.
1. ASSET MANAGEMENT
Many companies have only a vague idea of the computer hardware and software they possess and have paid for. Make an inventory of everything you have.
This may throw up all sorts of unused hardware - PCs, servers and printers that for whatever reason are no longer required and could be pressed into service elsewhere in the organisation.
It is even more important to know what software assets you have. If you have more software than you are using, you are wasting money. If you find more users than paid licences, then you are committing software piracy.
According to the Business Software Alliance, an industry body that fights piracy, between 20% and 25% of all software in a typical organisation is running illegally. On the other hand, companies will often have too many licences for the software that they run legally. Once you know what you have, you have a baseline for going forward, killing both illegal software and unused software licences.
For hints on managing software assets, see BSA's advice website: www.justasksam.co.uk.
2. CONSOLIDATE SYSTEMS
This can operate at several levels. If you have more than one data centre or helpdesk, look at integrating them. Simply reducing the number of servers running IT applications will save money. Says Kevin Prone of IT services company Zeda Systems: 'As IT departments grow with the business, so does the number of servers. Each new server requires administration, back-up, licences and maintenance, as well as more staff, eventually. A bulk licence agreement can consolidate all your servers, thus removing this burden.'
It is also possible to take a 'virtual' view of your computing power and data storage, harnessing the processing and storage capability of all the IT devices across the organisation and treating them as one large computing resource. In other words, if one server is running out of power it can offload some of the burden on to another with spare capacity.
This is what Bob Tarzey of analyst firm Quocirca describes as 'a dynamic services-based infrastructure', which can boost usage of existing assets from 20% to 50%.
3. RENEGOTIATE COMMUNICATIONS CONTRACTS
The Corporate IT Forum, a body made up mainly of FTSE-100 companies and public-sector organisations, runs a corporate performance benchmarking service to reflect best practice. It strongly recommends renegotiating your telecoms charges, because network costs are coming down all the time and it is vital to be flexible with your contracts. For instance, demand special rates for employees who call each other on mobile phones.
Gerald Dunn of management consultant Qedis says the contractual and billing arrangements for major corporate voice and data environments are complex and prone to mismanagement. 'All telecoms operators struggle with the billing challenge, and so it pays to have processes in place to monitor and duplicate erroneous invoices. The rapid change in this area over the past 10 years means the management of telecoms strategy, contractuals and spend cannot be left with IT generalists, but requires staff with deep telecoms expertise.'
4. REDUCE COMPLEXITY
Each different type of system you run requires different skills and special efforts to maintain it, which usually means having more staff to do it. Reduce the computing platforms in your organisation and it will simplify support.
'Large companies, especially those with decentralised IT decision-making, can end up with, say, five database platforms, four e-mail systems, five hardware and operating systems, and six programming languages,' says Raman Palepu, founder of US-based RollStream.
'Staff and maintenance costs are enormous.'
Some companies choose to opt for a standard desktop system for everyone in order to simplify support. On one level that makes sense, but your asset management processes (see above) may reveal that many staff use only a fraction of the features.
Quocirca's Tarzey suggests that some workers should be able to work adequately on a cut-down, low-cost system dedicated to single tasks, or single tasks with occasional access to other services. So the solution could be to have a small number of standard systems designed for different levels of worker.
5. OUTSOURCE - VERY CAREFULLY
Outsourcing was the area that created the sharpest split in opinion.
The Corporate IT Forum, whose members are all computer users rather than suppliers, is currently against outsourcing. It advises the avoidance of outsourcing if possible; if you can keep the resources and costs in-house, do so.
Indeed, one of its members, J Sainsbury, has just cancelled a huge IT outsourcing contract with Accenture. Most observers agreed the deal had gone sour because Sainsbury itself had not exercised proper control over the contract, and reckon the company had been wrong to go for a single, big-bang contract in the first place. More favoured these days is the selective outsourcing approach, where the work is handed out in smaller parcels to specialist suppliers.
It also proves that it is unwise to leave it to the outsourcer to provide your business transformation. The strategic vision has to remain in-house, with much of the IT expertise.
Voice-over IP (VoIP)
Instead of running old-style telephone systems with their specialist exchanges and cabling, switch telephone calls to run over your data networks.
That way, you have only one network to maintain and support, and you can create all sorts of new services.
VoIP has taken some while to gain acceptance, because of question marks over its reliability and security, but the technology now looks set to take off. Analyst group Gartner predicts that by 2009, a third of all telephone calls from Europe and the US will be made over the internet rather than via phone lines.
Alastair Buck, a director at communications company Viatel, says VoIP can cut call costs by half or more, while providing free features such as voicemail and conferencing, and free calls between offices.
You need to ensure that your data network has the capacity to carry voice and data over the same lines, so there may be some initial upgrade costs. VoIP handsets cost about £60 each.
Finally, make sure you have proper network management systems to ensure that voice traffic takes precedence over other less time-sensitive data.
Otherwise, phone calls could be disrupted by a bored clerk deciding to download the latest Harry Potter film.
7. AUTOMATE SECURITY
IT security tends to focus on keeping out viruses and other malicious code, yet most security breaches come from within the organisation, through either the incompetence or the malice of users.
Although security is a necessary cost of doing business in the internet age, it's possible to automate many of the tasks involved and so cut operational costs. For instance, in many companies the helpdesk handles requests from users who have forgotten their password. This is expensive, but the process can be managed automatically without human intervention.
The process of assigning access rights and user accounts for employees - and then switching off those rights when they leave - is usually managed in a haphazard fashion that leaves the company open to a security breach.
The Butler Group estimates that it can often take a year for all access rights to be cancelled after an employee leaves. Automating the process saves money and time, and improves security.
8. UPGRADE LESS OFTEN
Does everyone in your company need the very latest PC on their desk, complete with the most up-to-date software? Probably not.
The Corporate IT Forum recommends extending the life of your desktop by resisting the urge to upgrade every three years, unless having the latest version of any software is absolutely necessary.
If you can extend the working life of your desktop kit by another year, you could save an enormous amount of money.
Says Tony Allen, technical director of Experian: 'Modern PCs are now more reliable and less prone to obsolescence. Consider a four-year replacement cycle rather than two or three years. Printers and monitors should now last five years.'
9. PICK WINNERS AND KILL FAILING PROJECTS
Up to half of all IT projects never make it to successful completion. Josh Pickus, head of the business service optimisation unit for Computer Associates, recommends carrying out regular reviews of IT projects and killing off those that are struggling at an early stage.
This is part of a portfolio approach to applications and projects, in which senior management has to decide which projects are vital to the business and which are just 'nice to have' but not essential.
Accenture advises a tougher approach when considering new project proposals, and suggests pruning investments that do not have the necessary financial or strategic impact on the business. Projects should be prioritised to make best use of IT resources, thereby avoiding peaks and troughs in staff workloads. Capacity planning six months ahead will help iron out the need for contractors to meet peak demand.
This pre-supposes strong two-way communication between the IT function and the board in a language that they both understand. IT needs to be more business-focused and the board needs to buy into new projects.
10. ADOPT STANDARDS AND FORMAL METHODS
IT people are famous for trying out interesting new technologies, but this can create a support nightmare down the line. Encouraging the use of well-established standards will help prevent IT constantly re-inventing the wheel. For instance, the IT Infrastructure Library (ITIL) is a well proven, publicly available set of tools for the delivery of IT services.
The security standard BS7799 provides companies with a comprehensive checklist of everything that needs to be covered in building a security policy. These and other standards are readily available and cost virtually nothing, yet they can bring order and method to system development.
Encourage IT staff and other IT users in the company to gain proper certification for their skills. The Skills Framework for the Information Age (www.sfia.org.uk) is a project backed by the Government to create a formal approach to IT skills for all levels of work - from the casual user, who needs a basic knowledge, up to the IT specialist.
IT BUDGETS ON THE RISE Global vendor revenues 2001-05 TOTAL CHANGE YEAR-ON-YEAR 2001 $546bn - 2002 $480bn -12% 2003 $496bn +3% 2004 $552bn +11% 2005* $606bn +10% *estimated Source: Forrester Research
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