Best Practices for Controlling IT Costs

Here is my take on keeping your company’s information technology expenditures under control.

1. Know the Relationship Between Your I.T. Costs and the Business

You can’t be adept at cost containment if you don’t know how much you’re spending and what you’re spending it on. So, understanding your costs is the first step that every I.T. manager must take. This doesn’t mean simply knowing, say, that you’ve got a £20 million capital budget or a 100-person staff. It means having detailed conversations with your business counterparts so you have a chance of adjusting the inputs when costs are an issue.

2. Improve/Standardise Your Processes

Over the last three decades, so much new technology has come into the workplace that it has been impossible for most companies to be systematic about putting it to use. First there were personal computers, then there were local-area networks, then there was the Internet.

But the pace of technology innovation has slowed, and some companies have taken advantage of the respite to develop procedures for getting more from their technology investments.

In particular, multinationals are turning to the ITIL framework to become more organised about how they use technology. ITIL, which is the abbreviation for Information Technology Infrastructure Library and was originally developed in the U.K., is a set of guidelines for how to manage areas like security and applications, and is associated in the minds of some I.T. executives with effective cost management.

3. Use a Project Management Office

Project management offices (PMOs) is another avenue of cost containment that has to do less with technology than with managing it.

PMOs, which are departments of people who supervise big technology initiatives, don’t make sense for companies whose I.T. projects are few and straightforward.

Indeed, in the early 2000s PMOs were rarely seen at small to midsize companies, but nowadays they are becoming a familiar tool within the mid-cap market. Financial firms and health-care companies are leading the way and most other Mid-cap companies are in the process of setting up PMOs.

Theoretically at least, PMOs save money because they are staffed by independent analysts and managers who aren’t stumping for anything other than business success. In a way that everyday technologists might not be, the PMO is more focused ad able to deal with signs of scope creep and requirement creep — things that can lead to delays and spiraling costs. The PMO would also tend to take a much more realistic view of a project’s progress than would, say, the team of developers or technical sales people who conceived it.

A PMO’s toughest responsibility revolves around stopping projects outright, which is one of the most difficult technology decisions companies ever make.

4. Use Virtualisation

Competition and an increase in PC capability have allowed companies to save on their raw computing costs. Now a new wave of savings has arrived, made possible by virtualisation software that lets servers do several different things at once.

How big is the savings opportunity? One indication is that server-utilisation rates average 10% to 20% for most big companies; storage utilisation averages 25% to 35%. So by getting those computers to take on more tasks you can make do with fewer computers.

Using virtualisation software (VMware is a popular choice and market leader), an expert in infrastructure design could put eight virtual machines on one server — meaning an e-commerce site could slash the number of machines it’s using to 100 from 800. While that may look like an eightfold savings, the actual savings are more modest — between 40% and 70% — because of increased network costs and the need for more powerful servers. But that’s still a significant cost savings and one which is making more and more CIOs take notice.

Virtualisation also has some benefits that go beyond lower cost. For example, a software manager can try out an environment for a new project by tweaking an existing machine and testing the environment on it instead of having to requisition a new PC. This advancement in technology allows Senior IT Managers to be much more flexible and versatile e.g. being able to respond to business requests in say 20 minutes instead of six weeks.

5. Be Opportunistic

Not every cost-control tactic results from using a specific technology or adhering to some specific discipline. Sometimes, it’s about exercising sound business judgment.

Contract renewals are one example. Even big companies don’t always appreciate the negotiating power they have. And when they provide too much information to vendors — like the lead programmer who says, “The contract is yours; we’re just waiting for one sign-off” — companies become their own worst enemies. Such information leaks will cause any pricing discussion to become very difficult.

Of course, it’s not just contract renewals that provide a shot at cost savings. Say a company is remodelling an existing building and moving employees around. That’s a chance for technology builders to migrate to a wireless VoIP (voice-over-Internet Protocol) network and avoid having to pay unionised workers to punch holes in walls or pull copper cables around. Over the years, a change like this can yield ongoing dividends by eradicating the need for building maintenance to get involved when, for instance, an employee gets promoted. With VoIP, the employee can just pick up his phone and plug it in at the new workspace.

Question: Let me know your thoughts and strategies for controlling IT costs. DO you agree with my analysis? What other practices can we implement?

Author: Mawdud Choudhury, Chief Information Officer (CIO) at Universal System Technologies (UST), Brunei Darussalam.


One thought on “Best Practices for Controlling IT Costs

  1. Hi All.

    I need to throw in ‘cloud computing’ and ‘social media / Web 2.0’ as other areas where IT costs can be reduced and controlled more efficiently and proactively.

    What do you think?



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