Cost cutting in information technology looms over many corporate IT groups now, in these tough economic times. Here are tactical projects that you can execute in a few weeks to a few months, reaping rewards almost immediately. Smart contract talks help an IT department save big
No one wants to overpay vendors, but Lafarge North America was.
Patrick Kys, VP of IT and CIO of Lafarge North America, thought he wasn't getting the respect -- that is, the pricing leverage -- he should get from the company's major suppliers, such as AT&T, HP and Microsoft.
Lafarge North America is a private company, owned by Lafarge Group SA in France, that makes concrete, gypsum and other construction materials. With US$2.1 billion in sales, the Herndon, Va.-based company isn't small potatoes.
But Kys and other senior managers didn't know what level of discounting they could get and therefore weren't sure they were as bold in negotiating as they could have been, Kys says. It's hard for individual technology managers to get reliable information about what others are paying, he says, even from each other. Vendor contracts often stipulate that customers can't discuss pricing. Maneuvering with vendors around the negotiating table takes practice.
To gain perspective, Lafarge North America last year hired NPI Financial, a spend management consulting firm in Atlanta. Within several weeks, NPI had reviewed the company's contract with AT&T. NPI then reviewed other Lafarge North America IT contracts and concluded that it was overpaying several vendors. Right away, the company set to work to get better deals.
NPI advises many clients and negotiates for some, collecting benchmarks on vendor pricing across industries while keeping individual client data confidential. Kys says he got the inside knowledge he couldn't get elsewhere.
NPI representatives guided Lafarge negotiators, and sometimes stepped in to negotiate, in contract talks with AT&T, getting the vendor to "do better" on pricing, says Sepehr Kousha, IT controller at Lafarge North America. For a negotiation with Hewlett-Packard, NPI provided benchmarking, she says. "That's very effective."
"We took their arguments off the table," Kys adds.
Lafarge is a big HP shop, using HP desktops, laptops, servers, printers, storage-area networking products and various utility software. When it was time to renew maintenance and service agreements with HP, NPI spent two weeks assessing Lafarge North America's current contracts against similar terms, conditions and pricing offered by third-party providers and against what HP was offering other customers, Kousha says.
"This helped us to not only improve our current-year prices but to also negotiate a multiyear deal, whereby our prices are not locked for the next 24 months," she says. Those negotiations took about six months. That's not unusual, as software pricing is not only costly but complex.
In a new networking and data telecommunications deal with AT&T, Lafarge gained "seven-figure savings," Kousha says. She declined to provide specifics.
Kys adds that that savings was 20 percent more than he had anticipated. He credits NPI with getting that margin. NPI is paid a retainer, with some incentive-based fees as a bonus.
Telecom negotiations are usually intense, Kousha adds, but better informed, Lafarge staff persevered. "They try and wear you down and won't come to a final price quickly. They try to make you give up," she says. "We decided tactically to hang in there."
Kys advises other IT leaders to add a controller or financial manager to the technology department. Most IT managers negotiate with vendors "sporadically [and] don't have all the tactics to win." Kousha reports to Kys, with a dotted-line reporting relationship to the corporate finance chief.
Next up for Kousha and Kys are contracts for storage equipment and Cisco's Smartnet technical support.
The Gap finds an IT tool that saves time, money
Compliance. You can't avoid it and you can't keep failing it. The best you can do is make it cheaper and easier and good enough to pass audits.
Anyone trying to comply with PCI and Sarbanes-Oxley regulations knows that passing an audit hangs on demonstrating that you control employee access to sensitive customer and financial data.
So it was at Gap Inc. Direct, which oversees the e-commerce efforts of Gap, Banana Republic, Old Navy and shoe outlet Piperlime. But controlling access wasn't simple in a mixed environment of mainly Unix servers, including Linux, and various Microsoft Windows operating systems.
Gap Inc. Direct uses Microsoft's Active Directory administrative tools. Among other features, Active Directory lets system administrators grant and control end-user permissions more easily than many Unix tools, says Jeff Arcuri, a senior manager of IT at Gap Inc. Direct.
Active Directory by itself doesn't support Linux or Unix so Gap's system administrators ended up having to assign employee permissions individually, to access different databases and applications, depending on the work they needed to do.
When it came time for PCI and Sox audits, auditors or system administrators had to collect the server logs manually to show who accessed what files when, for hundreds of servers. They could automate bits of the process with custom scripts but still, start to finish, the ordeal required up to 10 people working at least part-time on every audit, he says.
To automate more of the process and free up systems administrators for more valuable work, as well as make user access permissions in this mixed operating environment simpler, Arcuri deployed an identity management tool from Likewise Software. The software installation took about three months early this year and involved two to five system administrators at various points, Arcuri says. Installing identity management systems can help a company enforce policies for who can see what data.
Now the company has set up group profiles for several different kinds of employees, so administrators don't have to configure profiles individually. Likewise also produces reports by user, by date and by server. The number of people working on a given audit has dropped to about five, Arcuri says.
"At the end of the day, we have to report on this stuff. The question was whether or not we could better our reporting," he says. "Now we get more data in a faster time and a better return-people-to-work time."
The implementation cost US$400,000 but the company expects to see several hundred thousand dollars to $1 million per year in savings, mainly stemming from more efficient use of system administrators' time, Arcuri says.
Asset management tools show unneeded apps, hardware
The US Department of Defense budgets US$20 billion for information technology in a given year and no one person or spreadsheet or database keeps a running and accurate count of all the pieces of hardware and software in action.
That's not unusual for any large organisation, which is why the asset management discipline emerged. The first step is figuring out what useful and not so useful computer gear is hanging off your network, then lay to rest those wasting time and money. A project to do that at the U.S. Army has so far produced multimillion-dollar savings and now the DoD itself wants to replicate it, says Joe Paiva, a leader in the DoD responsible for IT portfolio management strategy and policy development.
Paiva worked with asset management software from BDNA Corp., a private company in Mountain View, Calif. In one day, he and his team installed the BDNAInsight "agentless discovery" product on servers in one Army office, to search various servers and PCs at major Army bases and facilities.
"Agentless discovery" means the software automatically crawls an IP network to record every device and piece of software attached to it. Initial scans take about a day, Paiva estimates. BDNAInsight then spits out a report that can be sorted by type of device, server crawled and other variables.
The process turned up some surprises and has helped the Army close money leaks.
For example, across Army facilities, individual Oracle database and applications licenses were in use, sold to local military purchasing agents by value-added resellers. By moving those to an enterprise license and maintenance contract with Oracle directly, the Army saved "tens of millions" of dollars, he estimates.
On the hardware side, the Army found some printers that were underused and others overused. "A big printer that should be doing thousands of pages a month was doing only 100," he says. Paiva was promoted before the Army tackled printer reconciliation, but with a good asset discovery tool, he says, "you can very quickly see this doesn't make any sense."
As an ancillary benefit, the asset management program has helped the Army improve security. For example, Paiva's team found versions of the FoxPro database, which Microsoft now owns, that the military stopped using years ago. "We found older versions of the database." he says, "that potentially had vulnerabilities," such as letting data pass unencrypted over a network.
Another example: at Fort Belvoir, an Army base in Virginia, the software immediately found 103 copies of Google Earth, according to a presentation Paiva made soon after BDNAInsight was installed, to the Armed Forces Communications and Electronics Association, a nonprofit group studying military and homeland security IT. While individuals can use Google Earth without a license, large organisations aren't allowed to.
Also turned up at Fort Belvoir were 54 possibly unsanctioned copies of iTunes and several instances of Google Talk, which could allow unauthorized VoIP and instant messaging. "At installations where we thought we had all of the computers tightly locked down, it showed we had software which had been installed without going through our software approval and installation process," he explains.
"This is not just an Army thing. Compliance is always a challenge in any big organisation." Managing employees using unsanctioned technology is a growing task.
Any large company can get the same benefits as the Army and the DoD, Paiva says. After serving for 10 years in the Army, he was an IT manager at a hospitality company and at a healthcare company. When the Iraq war started in 2002, he took a civilian IT management job with the Army.
Jack Heine, an analyst at Gartner, estimates that for organisations with no or very immature technology asset management programs, first-year savings could amount to 20 percent of the IT budget. Then 5 percent per year is possible for the next three years.
Save money with PC power management
Going green can save greenbacks, which is a welcome notion at Washington Mutual, which suffered heavy losses in the subprime mortgage crash.
The bank has cut its PC-related greenhouse gas emissions by 65 percent and is on track to save US$3 million on electricity costs this year, says Debora Horvath, WaMu's CIO and head of the bank's environmental council. Horvath has set the bank on other Green IT initiatives, including a bid to get the legal department to use less paper.
The savings from this bankwide PC project, though, will come from Verdiem power-management software, which WaMu installed on its 44,000 PCs last year, after a 100-machine pilot last spring. The software monitors activity on the computers, powering them down when they aren't in use. Less electricity used, more money saved. Cost-cutting drives most green IT initiatives, followed by efforts to be more socially responsible, according to our survey of 280 technology executives.
At WaMu, Horvath's team set up the system so that during business hours of 8 a.m. to 6 p.m., PCs and monitors in WaMu's retail branches remain on. At WaMu's back-office locations, monitors turn off after 20 minutes of inactivity and PCs go into standby mode after 30 minutes of inactivity. At 6 p.m. every night, if there is no activity, PCs go into standby and the monitors turn off. Employees working after hours can delay the software from powering down.
Laptops were removed from the rollout because ROI wasn't as great as on desktops, a spokesman says, adding that that assessment was based on a study performed by the vendor. The entire project, from pilot to enterprisewide rollout, took a few months.
Use BI to cut cell phone bills
BlackBerry, iPhone, cell phone, pager -- personal devices of every sort were rampant at Title Resource Group, a real estate closing company that's part of the US$6 billion Realogy Corp., which owns Century 21, Coldwell Banker and other franchises.
This time last year, Title Resource employees could use any cell phone they wanted for work, even personal devices that they, not the company, owned. Corporate calling plans for managers, sales reps and other employees allowed for a few hundred minutes per month.
Some employees used a personal plan, even on a company-owned device. Other employees submitted cell phone charges on monthly expense reports, says Nehal Trivedi, CIO at Title Resource.
As a result, the company didn't know exactly how much money it was spending on cell phone bills. But Trivedi had the feeling it was too much.
"A thousand dollars a month raises a lot of eyebrows," he says. "If it was your home bill, you would look into it no matter how affluent you are."
Trivedi needed data to make a business case for reining in cell phone expenses. So business intelligence specialists in IT worked with corporate finance to collect the data from invoices and expense reports. Armed with specifics, Title Resource then negotiated contracts with two preferred cell providers, AT&T and Verizon, that give the company better rates.
Employees were then categorized as minimal use, voice-only use and voice-and-data use, Trivedi says. Minimal-use employees are capped at $40 per month in usage. Voice-only people get plain cell phones, not smart phones. Those allowed voice-and-data plans can get BlackBerrys or other smart phones, he says.
Title Resource enforces the limits by sending spending reports to senior managers every month, detailing whose monthly bills were highest. "We started paying attention to the top talkers, and [their bills] are difficult to justify," Trivedi says.
The project took a few months, and the company saw savings with the first phone bills, Trivedi says. He declines to specify how much he's saved, but says companies can knock 30 percent to 35 percent off their monthly cell bills this way. Corporate cell phone usage policies are increasing, as the devices themselves pervade companies.
Savings from a project like this depend on the level of control the company exerted on cell phone usage at the start, says Erik Dorr, senior IT research director at the Hackett Group. "If the starting point is entirely unmanaged and the new state is tightly controlled," he says, "then 30 percent to 40 percent is entirely reasonable." International roaming charges are especially expensive.
Of course, there was pushback. If there's one thing people grow attached to, it's their phone, smartphone, handheld device, PDA — cool devices define the corporate self the way a fancy car might. One recent study showed that while BlackBerrys dominate the enterprise, iPhone users are happiest.
Trivedi had to tell people that yes, they must give up ownership of their main work device. But after he showed them examples of how much they'd be saving the company, most bought in, he says.
If employees wanted to keep a second device, they could choose to do so at their own expense. And they did get to keep their old phone numbers. Finally, the top-talker report loomed, he says. "No one wants their name on there."
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