The recession has forced many businesses and public sector organisations to put expenditure of all kinds under close scrutiny, and it was no surprise to see that ‘Reducing IT Costs’ was quickly elevated to the top of many IT department’s strategic priortities. But while IT assets are an easy target fo cost reduction exercises, it’s what those assets do for the business that can have a far greater value than their removal rewards. Information flow is the lifeblood of businesses and cutting back on IT assets can quickly strangle that flow. Keeping the assets requires money but that justification can  be made easier by demonstrating: 1/ the value of the assets, 2/that the assets are being acquired and maintained at rock bottom prices through good negotiation, and 3/ that the assets are being fully sweated prior to retirement or replacement. IT management is no longer simply about running a good IT department, it now includes keeping a canny eye on cost management, ROI and contract negotiation skills. Some of these skills you may already have in-house and the rest you can buy in from such cost management advisors like Silver Bullet Associates.  Instead of stripping assets you should first squeeze your IT suppliers.

According to various sources, the most effective strategies applied by businesses last year to help reduce their IT costs were 1/ encourage remote and mobile working, 2/ deploy more cost effective technology, 3/ negotiate lower IT costs with their incumbent IT suppliers, 4/ deploy open source applications, and 5/ standardise on one application platform. Many businesses were loathe to lose staff or to outsource as a quick fix. Silver Bullet Asociates helped many businesses negotiate cost savings and cost reductions with their IT suppliers last year and we are looking forward to doing the same this year. In fact, we’ve already made a fast start and have saved money for a handful of clients whose IT negotiations had drifted over from December.

I had to laugh the other day. IT cost reduction comes in many forms; one of which popped up when we were questioning a well known software supplier about a proposal they had produced for a client of mine. To the comment ‘your proposal doesn’t explain whether these are list or discounted prices’, the supplier replied by saying ‘they’re neither list nor discounted prices’. Once we had stopped laughing the supplier clarified by saying that the proposal included ’special prices that bear no relation to their own price book or to their current list prices’. They had simply bundled the software licence costs with the implementation services and the on-going maintenance costs, and had then taken off an arbitrary discount off the whole lot. We then insisted that they break down the bundled costs and show itemised list prices, discounts and net prices for every product and service. Unsurprisingly, this revealed that they had varied discounting with some items discounted aggressively and some items remaining at or near list price (the latter of which no doubt gave more commission to the salesperson at that particular moment in time). Suffice to say, itemising allows everyone to see how a deal has been shaped and enables good negotiatiors to attack both the detail as well as the total cost number.