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Best Practices to Save Money in IT
Jack HeineResearch Vice President Sacramento, CAAugust 7th, 2007
© 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.
DTS Technology Day August 7, 2007
8
There are no Silver Bullets out there!!!Objectives:
- Reduce costs as much as possible without negatively impacting essential services
- Cut waste permanently, this will require process and procedure changes
- Consider charging for all new services, you want it …you come up with the bucks!
- Cost savings opportunities come in small, medium and large.. go after all of these!
- Cost reduction plan must include some quick hits
- Organize a cost reduction program, and keep it alive!
© 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.
DTS Technology Day August 7, 2007
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Key Issues
• What specific internal policies and procedures can be can be changed to reduce IT costs?
• What actions can be taken in the area of software licensing and maintenance services to reduce costs?
• What actions can be taken in the area of resource acquisition to reduce costs?
© 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.
DTS Technology Day August 7, 2007
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Use the 25 common IT cost containment techniques framework to identify opportunities
18. Refresh/ Upgrade Delay
22. Telephone Bill Audit
10. Automated Software
Distribution
14. Open-Source Software
Manage Demand
Shift to Variable Cost
Link costs to demand
2. IT PMO
4. Contingent Workers
5. Software as a Service
6. Capacity-on- Demand
3. IT Governance
Improve IS Business Practices
20. Print Fleet Rationalization
19. Asset/License Management
Change IS Operating
Model
15. Data Center Consolidation/
Automation
16. Standard Operating
Environment17. Teleworking
21. Telephone Expense
Management
25. Apps Dev Process
Improvement
24. IT Operations Process
Improvement
23. Contract Renegotiation
Reduce Resource
CostsReduce
Technology Cost
11. Server/Storage Virtualization
12. Voice/Data Network Reengineering
13. Voice over Internet Protocol
Reduce Labor Cost
7. Staff Reconfiguration
8. Selective Outsourcing
9. Offshore Outsourcing
Change Operating Practices
IT c
ost
cont
ainm
ent
1. Chargeback
© 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.
DTS Technology Day August 7, 2007
11
Exploit Self-Service Opportunities
Self-service platforms offer opportunities to significantly reduce costs and improve service!
Password Resets ($5.50 vs. $0.45)
IVR Help Desk Diagnostic
HR Administration Benefits Selection and Maintenance Financial Planning Career Development
IT Supplies Provisioning/Electronic Catalog Ordering
© 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.
DTS Technology Day August 7, 2007
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Eliminate Release-on-Demand Practices
• Release-on-demand is the practice of continuously modifying software to meet customer requests for “nice-to-have” enhancements. Move toward major scheduled releases for software enhancements.
• Expect:
- 30% - 50% reduction in labor associated with applications maintenance.
- Improved break/fix ratios for applications
- Better code quality and more effective testing
© 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.
DTS Technology Day August 7, 2007
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Revisit Disaster Recovery Plans
• Establish inter-agency backup sites
• Review and reprioritize application requirements
• Review support site tools, keep only essential items
• Review Telco requirements, consider cost effective alternatives
© 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.
DTS Technology Day August 7, 2007
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$500,000.00
$495,751.36
$400,916.52
$275,357.96
$198,748.96
$146,457.86
$50,949.00
$23,316.42
$20,652.93 $2,095.50
Actual Client Study
Savings by Type500,000.00$ Tax Savings fr. Location Change495,751.36$ Rate or Usage Amount Dispute400,916.52$ Maintenance Previously Cancelled275,357.96$ No Bank One Business Owner198,748.96$ Lease Previously Cancelled146,457.86$ Invoice Previously Paid50,949.00$ Supplier Credits Needing Research23,316.42$ Cancel Maintenance Immediately20,652.93$ Exceeded Contract Rates2,095.50$ Short Pay of Cumulative Statement
2,114,246.51$ Total Savings
No Record of Transaction
Low-Hanging Fruit — Audit Invoices
© 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.
DTS Technology Day August 7, 2007
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Reduce HD Calls
StandardizeSLAs
TCOReduced
23%
Standardized Desktop Configurations
Consolidate Servers
Reduce Hardware Maintenance
Reduce Software License
ImprovePurchasingLeverage
IT Standardization: The Ongoing Benefits
© 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.
DTS Technology Day August 7, 2007
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Key Issues
• What specific internal policies and procedures can be can be changed to reduce IT costs?
• What actions can be taken in the area of software licensing and maintenance services to reduce costs?
• What actions can be taken in the area of resource acquisition to reduce costs?
© 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.
DTS Technology Day August 7, 2007
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• Evaluate against buying only software to be installed in the next 6 to12 months.
• Negotiate correctly to remove unused licenses from support.
• Ensure that you understand any license restrictions.
• In the agreement, include the right to new functionality.
What Was Licensed: What Is in Production:
Module A $250,000Module B $400,000Module C $125,000Module D $50,000Module E $35,0002,000 Named Users @ $1,250 $2,500,000Total List Licenses: $3,360,000Discounted 50% $1,680,000
Yearly Maintenance @ 20% $336,000
Module A $250,000Module B $400,000Module C $0Module D $0Module E $35,0001,200 Named Users @ $1,250 $1,500,000Total Software Using: $2,185,000Discounted 40% $1,311,000
Yearly Maintenance @ 20% $262,200
Shelfware Cost: $73,800
Software Costs, Usage and Smart Contracting
© 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.
DTS Technology Day August 7, 2007
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Assume a 50 Percent Discount on the $4 Million Software: $2 Million Initial License Cost
Maintenance Maintenance Maintenance and Support and Support and Support
at 18% at 20% at 22% First Year: 2003 $ 360,000 $ 400,000 $ 440,000 Second Year: 8% $ 388,800 $ 432,000 $ 475,200 Third Year: 8% $ 419,904 $ 466,560 $ 513,216 Fourth Year: 8% $ 453,496 $ 503,885 $ 554,273 Fifth Year: 8% $ 489,776 $ 544,196 $ 598,615
Total Maintenance: $2,111,976 $2,346,641 $2,581,304
Sixth Year: Maintenance cap is over, based on “then-current” list price: $4,862,025 Due 2008 $875,165 $972,405 $1,069,646
Discuss rights to move to alternative support levels, such as silver/gold/platinum.
Software Maintenance Cost: Five Years
© 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.
DTS Technology Day August 7, 2007
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Key Issues
• What specific internal policies and procedures can be can be changed to reduce IT costs?
• What actions can be taken in the area of software licensing and maintenance services to reduce costs?
• What actions can be taken in the area of resource acquisition to reduce costs?
© 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.
DTS Technology Day August 7, 2007
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Purchase Used vs. New Equipment
• Cut acquisition costs by as much as 75%• Common business practice, “used” does not mean
“junk”• Most PCs for example come with 90 day warranty• Extended technological life makes this practice
more attractive today than in the past• May be able to acquire extended warranty
coverage• Consider replace vs. fix policy
© 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.
DTS Technology Day August 7, 2007
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Consider “Maintenance” Alternatives
• Third party maintenance can be as good or better than OEM ……..at half the cost
• Consider dropping maintenance after initial equipment warranty period expires, use replace rather that repair mode in out years
• Explore reduced SLAs for non-critical equipment
• Explore opportunities to reduce software maintenance costs, audit maintenance billing, and drop maintenance where applicable or chose other maintenance levels
© 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.
DTS Technology Day August 7, 2007
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Implement Demand Management
• Reduce Storage Requirements
- Cull out old and duplicate data files
- Implement and enforce tiered storage architecture
- Consider Storage on Demand arrangements for cyclical storage requirements
- For many organizations storage is growing at 65% CAGR
• Reduce Print Costs and Demand
- Charge for all print services (this can significantly reduce demand)
- Eliminate most personal printers (huge potential savings)
- Ensure all supplies are centrally purchased
- Make sure color printers are not used for non-color jobs
© 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.
DTS Technology Day August 7, 2007
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InvoiceReconciliation
Sample Scoring Model
8%–15% CostReduction
Low 0 - 6
ScoreWeighted
ScoreWeight
%
PotentialValue
Mgmt.Priority
Months to ValueObjectives
Probability of
Success
Reduce Telco Requirements
Reduced Charges
0 - 3 Medium 0.7
Life CycleManagement
15%–25% CostReduction
12 - 24High 0.2
ReducedComplexity
23% TCOReduction 18 - 24 High 0.5
Improve Software Acquisitions
Reduced Maintenance $ Medium 6 - 12 0.7
0.9 Do This First!
Cost Reduction Opportunity Analysis
© 2007 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates.
DTS Technology Day August 7, 2007
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Recommendations
• If you’re serious about IT cost savings, then have a plan
• Don’t look for a single panacea for cost savings opportunities
• Look in new places for your next IT cost savings opportunity
• Long-term, sustained cost containment is a PROGRAM …………………. not a project !
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