As technology plays an increasingly important role in the business, IT departments are evolving. They’re moving from a back-office function that supports the business to a true business driver.
The problem is, many of these CIOs and IT leaders are still stuck working with limited budgets. IT budgets took a beating in the recession a few years back, and many still haven’t recovered. In fact, according to Computerworld’s yearly report, 64% of IT leaders report either a flat or smaller budget this year over last.
The question is, how can CIOs and IT leaders make the most out of their budgets? While being called upon to play a larger role in the business, many must do so with limited resources. How can they succeed?
Today, I’d like to answer that question and explore a few ways CIOs and IT leaders can save money. Now, when I say “save money,” I’m referring to long-term savings. I’m not interested in short-term cut-backs with long-term consequences. I’m interested in money-saving methods that will not only reduce costs, but prepare your company for future success.
1. Address the “legacy architecture” problem
In a recent Forrester survey, IT leaders estimated they spend an average of 72% of their budget just keeping the lights on. For many companies, this ties directly into their legacy architecture and applications. These legacy systems require more maintenance cost, effort, and keep them from innovation.
“Legacy architecture limits hardware/software options–often tying companies to outdated and costly hardware, or forcing them into expensive software options,” explains Rick Hurckes, Lead Consultant at mrc. “I’ve seen companies with legacy applications that tied them to outdated browsers or greatly limited their hardware options. For these types of companies, addressing the legacy architecture problem opens up a new, more cost-effective world of opportunities. It frees them from being limited to a small handful of hardware or software options, and creates opportunities that were never before possible.”
Now, I know–the risk and expense of such a project keeps many companies from moving forward. But, if that’s you, the question you should be asking is, “Which costs more in the long run?” As Hurckes explains below, the costs of inaction often outweighs the cost of action.
“I’ve had clients tell me they’re trying to save money by working with their legacy options,” explains Hurckes. “And you know what? For a short time, they’re right. However, it’s a great example of being penny-wise, dollar-foolish. Here’s what usually happens: They find their problems mounting each year as they try to use and maintain legacy code that can’t grow and keep up with technological trends. In the end, they’ve not only wasted more time and money maintaining their legacy code, they wind up spending much more years later when they are finally forced to upgrade–as the gap between their legacy code and modern standards has widened significantly.”
The big question is…how can you address the legacy architecture problem? While this whitepaper lists five different approaches, I’m a big fan of the “extend-and-surround” option. It involves gradually surrounding old applications with completely new and modern applications. It lets you modernize different parts of your systems gradually, as the need arises, without much disruption to the business.
2. Move to the cloud
“Some cloud services are becoming more affordable than comparable in-house services,” says Kelly Walsh, Founder of EmergingEdTech.com & CIO at The College of Westchester. “By moving the hosting of key services to the cloud, you may be able to reduce labor costs, electricity costs, equipment costs, and more.”
Now, will the cloud work for every company? Probably not. But, it creates money-saving opportunities for companies of all sizes.
I speak from personal experience when I say moving to the cloud not only saves money, it saves headaches as well. Over the last few years, we’ve moved many of our applications from in-house hosting to cloud hosting. It saves us from the cost of purchasing, maintaining, and upgrading servers. We don’t need to purchase battery backup systems, or rush to the office in the middle of the night to fix a server problem. Those are benefits any IT professional can appreciate.
Now, your ability to move to the cloud usually depends on the first point (architecture). If you’re still running on old architecture, chances are, the cloud–along with the cost savings that come with it–isn’t even an option. This is just one way that addressing the underlying architectural issues create cost savings in other areas.
3. Share services and products across teams
One of the biggest money-wasters within companies today involves a lack of communication between departments. In many businesses, departments operate on their own islands. I can’t count how many times I’ve seen different departments within the same company discover that they’ve licensed similar software to address a similar need.
How does this happen? This problem occurs when departments try to bypass the IT department and solve their own problems. This results in different departments spending money on similar solutions, unbeknownst to other departments or IT.
What does this mean for CIO and IT leaders? They must remain in constant communication with department heads. What problems are they facing? Do any of their problems overlap? This will help IT leaders implement software solutions that span the entire enterprise, not a single department.
4. Look at long-term hardware/software costs
Another big money-wasting mistake involves short-term thinking with hardware or software purchases. Many make the mistake of fitting the purchase into their current budget, without planning out the long-term cost. To truly make the best purchase, compare software/hardware purchases in terms of 5-year or even 10-year costs.
“Too many times companies look at the initial purchase price of a solution and not the 5-year cost,” says Ron Thompson, Jr., Senior Vice President – Western US at DataBank IMX. “When implementing a new software or solution, it is never a short term investment. You need to look at the additional rollout cost, software maintenance, and infrastructure (if not hosted) cost for a minimum of 5 years. This will give you a true comparison when you are evaluating multiple products.”
I’ll even add one more factor: shelf-life. When buying software, how long will it last? Is it regularly updated, or will it slowly become obsolete? If you’re forced to replace that software in 5 years, that greatly affects the long-term cost.
5. Consider a “BYOD” strategy
“Consider going “BYOD” (Bring Your Own Device), says Walsh. “More and more organizations are asking employees to use their own computers and tablets. Depending on the cost of services to manage the devices, there may be an opportunity to save on the cost of end user equipment.”
How much savings does a BYOD strategy offer? According to this recent study, it could save up to $1,300 per employee per year. Do the math–that delivers some attractive savings for companies of all sizes. So, how can you go about address BYOD? Here’s another article that I wrote up last year which goes into more detail.
So, what do you think? Would you add anything else to this list? If so, I’d love to hear in the comments.