Play the long game for bigger savings

Making short-term cost cuts could mean paying a heavier price in the long term

Alan Bowling

Measures to reduce the total cost of ownership (TCO) of IT as quickly as possible seem to be the order of the day.

While these short-term cost reductions may initially look good on the bottom line, without a strategic approach such myopic measures can end up costing the business more. The challenge facing IT departments is how best to reduce short-term costs without sacrificing the IT strategy and raising costs, thus increasing risk over the long term.

As IT departments look for short-term cost reductions, many are choosing to limit or cut regular activities such as upgrading software, and are holding on to hardware for a bit longer than they otherwise would. However, regular upgrading ensures you have the most up-to-date version, which may well include better performance, lower power use, enhanced features and so on. You should be careful that limiting your upgrade cycle does not cost more in the long term, because older versions require more maintenance and management.

From experience, I can think of many solutions that can help balance the IT budget in the short term, but also have long-term benefits and do not involve deviating from your planned IT strategy. It could be as simple as making sure old devices are turned off and removed from the datacentre.

Another way to engineer out costs is to make helpdesk and software support functions more efficient. Regular reviews of your internal processes can help ensure you know where accountability and responsibility lie, so that you can deal with incidents in a timelier manner when they occur. Server virtualisation is another area to consider, as it can lead to lower capital and operating expenditure.

I have also found that adopting a single sourcing strategy focusing on key vendors, rather than purchasing several products from other vendors, can deliver both short-term and long-term cost savings.

Such an approach gives you more leverage to obtain a better price and at the same time reduce overall integration costs. Whether selecting a single sourcing or a multi-sourcing strategy, you should look to examine your existing maintenance contracts, to see if you can get improved terms and prices.

Choosing a service-oriented architecture (SOA) approach is another route towards improved TCO. SOA can reduce costs through increased efficiency, by making use of reusable services or capitalising on existing ones. This can save organisations time and money in their software cycle, both in the short and long term.

Cloud computing and software as a service have also been touted as a way to
reduce short-term costs. However, many large companies have been hesitant to use this approach for all their applications or business-critical services. To minimise risk, you need to carefully review your contract to ensure that terms and conditions focus on service provision, and suppliers have adequate business continuity plans in the event of any downtime.

There are many options for reducing TCO, but none should be at the risk of long-term cost and sustainability. Only by weighing the advantages and disadvantages of each cost-cutting measure can you choose the solutions that best fit your business and economic needs now and in the future.

Alan Bowling is chairman of the SAP UK & Ireland User Group