According to a survey conducted on behalf of software supplier BMC, the majority of European organisations that have cut cost from IT operations are reinvesting those funds into strategic IT projects. The survey of 300 European IT decision makers found that 60% were reinvesting their cost savings strategically. This makes a lot of sense as strategic projects can pay dividends in helping businesses grow when economic conditions improve. While those businesses that just save money without reinvestment could lag behind when recovery begins. Every organisation is different and what they choose to do with their savings will depend on a number of factors. Reinvestment is one option. But so too is reducing IT costs such as software or hardware maintenance in order to use the savings to save jobs. Mark Bartrick, Managing Director of Silver Bullet Associates says “cutting IT costs is not hard; simply negotiate better deals with your IT suppliers”.

When new money is short in supply, and your Finance Director is pressing for measurable IT cost savings, what can you do to validate your existing spend or uncover hidden over-spend? That’s pretty much the question Silver Bullet Associates was asked today by an IT Director. It’s a good question so let me summarise what I said to him; price benchmarking is a great way to quickly ascertain if you’re getting value for money from your IT suppliers.  It’ll also highlight areas where you are paying too much (compared to other users of the same products or services). But selecting a benchmarker can be tricky as not all ‘benchmarkers’ are independent. Many ‘benchmarkers’ have some form of relationship with the very suppliers you want assessed. Just look at the main IT Research and IT Consulting companies; they advise both users and suppliers, which can cause conflicts of interest when it comes to offering best advice. So select your benchmarker carefully and look for true independence.

IT cost savings have become something of a Holy Grail in recent times as businesses and organisations of all shapes and sizes scramble to find ways to cut un-necessary costs. On the way to a Silver Bullet Associates client meeting the other day, I had a timely musical reminder of what IT management across the UK is facing when Simply Red’s ‘Money’s too tight to mention’ came on the radio. How many IT Directors have been told by their Finance Directors that costs must be reduced where ever possible? That kind of mandate will inevitably mean the IT Directors will take a careful look at all areas of spend, including revisiting the pros/cons of open-source products, virtualisation, outsourcing and offshoring. But before investigating such cost saving avenues, we would recommend that IT Directors look for some simpler savings opportunities such as re-negotiating existing vendor contracts and squeezing more value from your incumbent suppliers.