Containing IT costs is an ongoing challenge for most CIOs. Here are a few approaches to cost optimization they can take
“There is nothing high or low about cost; it is different from organization to organization. Most of them do the mistake of considering IT cost optimization as a one-time project. It has to be continuous and it has to be a discipline,” says Anil Khatri, Head (South Asia), Global IT-client technology and Field IT, SAP India
The challenge for any CIO is doing more with less. While this is not new to them, it is becoming almost routine to their jobs.
According to a worldwide survey of 2,053 CIOs by Gartner, 65% of the executives stated that the main barrier preventing organizations from achieving continuous optimization of IT costs was related to mindset (that is, the ability for all resources to work together in the same direction with the same goal).
The approach toward IT cost optimization is what determines its success. Here are seven ways in which organizations can achieve this:
1. Addressing the human factor: Says Arup Roy, Research Director, Gartner, “The major cost in IT is 55% human factor, and labor cost, having increased in the last 3-4 years, is having an impact on cost optimization.” The first way for a CIO for IT cost optimization is reduction in labor cost.
IT services firm iGate, for one, has persistently encountered human capital cost going up. Says Chella Namasivayam, CIO, “Optimizing resources is the best possible thing to do to optimize the cost. In such a scenario, internally, we use tools from Microsoft and Oracle to automate many of the ticketing processes [for tech support].” For example, iGate provides support for desktops for configuring applications, deploying the OS, upgrades, etc. Before automation, engineers had to physically go and run a script to do an update for each system. In an automated system, however, a ticket is raised by the end user, the orchestration tools pull the ticket and, in most cases, allow the update script to be run automatically on the machine. Now there is only one engineer required per 200 users as against 75 engineers needed earlier.
2. Overcoming bandwidth woes: In an increasingly connected world, no amount of bandwidth seems to be enough. For most enterprises, adding additional bandwidth every time demand goes up is not cost-effective. According to Robert Healey, Marketing Evangelist, APAC & Japan, Riverbed Technology, companies need to look at other alternatives to optimizing their bandwidth expenses and usage. “It is now imperative for organizations to look for alternatives for bandwidth addition to enhance network performance and optimize costs.” One way to achieve cost optimization is by deploying a WAN optimization solution.
3. Finding the right fit and ensuring consistency: Lack of adequate knowledge in terms of which vendor, which solutions and which devices are the right fit for the organization poses a challenge. Amit Luthra, National Manager, Storage Solutions Marketing, Dell India, says, “The key imperatives toward making a buying decision are speed, results and an understanding between the organization and the solutions vendor.”Another challenge is to address complexity, which adds to an enterprise's IT costs. According to Khatri of SAP, “Huge companies have made IT very complex. Ensuring they are on a standard platform removes inconsistent processes.”
4. Solving budget issues: Organizations need to show cost in a very transparent way and ensure that the cost has an accountable owner. While there is a big allure toward moving new technology, organizations need to weigh costs against the benefits incurred. Says Luthra, “While trimming down budgets is a way to reduce expenditure, in the long run it does more harm than good. For the last couple of years, IT expenditures have been pared down extensively and CIOs continue to be responsible for delivering new business capabilities, despite facing even greater resource constraints for funding them.”
5. Optimizing infrastructure: It really helps to look at the infrastructure that organizations have and what kind of upgrades are coming. Procurement is one area wherein companies can still bring down the cost element. They can look at centralized procurement and also review their existing contracts with vendors. Namasivayam of iGate shares his company's experience. The organization's US operations were becoming expensive. It was very difficult to keep and maintain different infrastructure components in the U.S. – like mailing systems for other countries apart from India. These were supported by engineers in the U.S. and India. So they identified applications like instant messaging services and collaboration tools that were hosted in iGate's own environment (which have now moved to the Microsoft cloud environment). Due to this initiative, the organization has reaped savings in the range of 20-30%.
When it comes to infrastructure, they use common infrastructure for all kinds of services. It goes through the common network underlying it, and optimally utilizes the licenses which have been procured from different vendors. It reduces the overall cost of operation through the charge-back model (iGate has its own private cloud).
6. Saving on power: A major cost for organizations is the money spent on power, including power used to run and support IT. iGate, like others, was also bearing the brunt of increasing power tariffs. Traditionally, they used to install the UPS system, which was meant for the entire building, for the load of technology at that particular time. “Selection of the right UPS is necessary to reduce power usage. With modular UPS, the ROI on power savings comes in less than 14 months. There is a wrong notion that reducing the footprint of equipment or load reduces power usage. It is extremely important to keep the power consumption tab of assets that organizations have and see as to which device consumes the most amount of energy,” says Namasivayam.
7. Making legacy work: Most organizations are upgrading their legacy architecture. In maintaining and managing the existing IT operations lies a huge opportunity to optimize IT costs. Organizations cannot simply shut down these elements. They have to think of ways and means to optimize it. According to Khatri of SAP, “Most organizations make the mistake of treating optimization as a one-time project. It has to be a continuous process. It has to be a discipline.”
