Top 10 reasons your IT costs should be going down 1. Cost of technology continually decreases over time a. Building blocks: processors, storage, LCDs, devices, peripherals, etc. i. Well understood/proven: Moore’s Law b. Less obvious: software, support services, data centers, call centers, c. So if you’re not continually testing the market, you’re not taking advantage of this 2. Innovation within the industry provides opportunities for cost reduction a.
b.
c.
d.
e.
f.
Virtualization “X”aaS (software, hardware, storage, infrastructure, etc.) Cloud Utility models and other innovative pricing Morass of different types/structures of SW licenses Services – innovations bringing down the cost here as well 3. Tech industry is fiercely competitive a. Understand the top competitors for each incumbent and play them off each other i. Think: computers, storage, data centers, telecomm, wireless, software b. Will go overboard to buy market share i. Willing to go deeper to win new business than hang on to an existing account c. Understand where the major suppliers are investing (new acquisitions, strategies, etc.) d. Don’t under estimate the power of well‐executed “illusion” of competition 4. Tech companies are obsessed with quarterly results a.
b.
c.
d.
e.
More so than seen in other industries Effective use of time pressures and quarter end to drive bargains Seek supply/demand disconnect with suppliers Be on the lookout for signals (sometimes subtle, sometimes not) Forget about existing agreements when it comes to end of quarter dealing 5. Solid benchmark data exists a. How do you know if you’re getting a good deal? b. Amazes me how often this is overlooked c. Many sources: Gartner, Forrester, trade associations, consortiums, peers 6. Most IT purchases have probably been done by IT guys a.
b.
c.
d.
How IT guys purchase (backwards, lack of competitive levers, lack of negotiation) Understand what IT guys are most concerned about (risk aversion) Skill set imbalance between buyer and seller How and why IT companies invest significantly in building engr‐relationships i. How much time do your IT guys spend meeting suppliers and why? e. Example: last 20 initiatives i. 19 resulted in savings, range from 5%‐55%, average over 20% 7. Many of the requirements have not been effectively specified a. IT guys tend to specify by brand and part number – with heavy bias b. Tremendous opportunity if you can drive to “parametric” specification c. Left to their own devices, IT guys will overly specify 8. Most extended warranty and replacement agreements are ridiculous a. Bought by paranoid IT guys b. Little rationale behind it i. Force cost/benefits analysis and comparison against alternative means c. Negotiate – more fluff in pricing here than anywhere else 9. You’re probably being over billed a.
b.
c.
d.
Most businesses don’t audit their invoices or have automated 3‐way match Suppliers try to confuse you with complicated billing Consider 3rd party specialty billing firms (e.g., Telecom) Consider 3rd party audit firms 10. You’re likely paying for things you’re not using a.
b.
c.
d.
e.
“shelf ware” (software) Phone lines Wireless plans Computing horse power (over‐spec, unneeded SW, etc.) Maintenance contracts