Under pressure to reduce expenditure and find cost savings, IT Procurement departments need to find new ways of removing cost without damaging the business. The challenge is to find where IT costs are not directly supporting demonstrable business benefits. Some examples include eliminating unnecessary projects that won’t add real value to the business, delaying new system purchases where a ‘make do with what we’ve got’ attitude is acceptable, and to operate at the leanest staffing levels without  losing a skills base that will be required when the economy turns around. The ideal scenario is to find projects that improve efficiency, not reduce effectiveness. According to various surveys and validated by many Silver Bullet Associates clients, operational IT budgets are being cut between 6% and 10% this year. So IT Procurement have their work cut out. One project we see underway in several of our clients is reviewing whether any software or hardware costs are tied to the number of employees or users; if they are then there is an opportunity to re-negtotiate with the IT supplier and re-set the costs at a lower level. Another popular project is to undertake a full asset management review to make sure no-one is paying for what they don’t have or don’t use. And price benchmarking is increasing as IT Departments search for negotiable savings opportunities.  All you have to do is to dig deep enough as there is gold in them hills (of IT contracts).

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.

IT budgets are facing a painful overhaul in 2009 with many analysts predicting that global spending on IT products and services would drop by 3% or more this year. This would be the first annual decline since the dot com crash seven years ago. Spending priorities would seem to centre on business optimisation technologies, particularly business process improvement and business intelligence. And while reducing enterprise costs will factor in most IT plans in 2009, its also worth noting that as cash becomes scarcer, its buying power increases.  As IT suppliers scramble for a diminishing pool of money,  your negotiation power increases. At Silver Bullet Associates, we suggest that perhaps this is the year for you to review your current IT costs and tackle some of the more expensive items head-on by re-negotiating better prices or terms with your incumbent IT suppliers?