Easy Ways to Cut IT Costs You May have Overlooked

There are literally hundreds of ways to reduce IT costs, and most IT people have heard it all, from the lofty "aligning IT with business strategy" to the back-to-the-Earth "greening of the datacenter."

There are literally hundreds of ways to reduce IT costs, and most IT people have heard it all, from the lofty "aligning IT with business strategy" to the back-to-the-Earth "greening of the datacenter."

But after IT has taken even the most obvious steps, like consolidation and virtualization in the datacenter and using open source software -- while bringing all assets and spend under control with vendor-supplied contract management, asset management, and spend management systems -- CFOs are demanding even more of IT.

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With that in mind, InfoWorld explores cost-reduction methods you probably have not thought of. Now's the time to try something new to save costs that don't compromise the systems you manage and the capabilities you deliver. Here are seven options.

1. Buy refurbished equipment Whether you call it used or previously owned, small and large companies alike are suddenly considering buying refurbished equipment rather than brand-new.

You can expect 40 to 50 percent discounts from the original price on most used equipment. In fact, the price of some used equipment may be reduced by as much as 90 percent, says Corey Donovan, vice president of operations at Vibrant Technologies, if you can use a three-year-old product. 

But you can't buy used equipment from the original vendors. That's because it's not in the vendors' playbook to adjust prices for older systems. "Some of the major suppliers will ask $20,000 for an older server when they're selling their latest servers with faster CPUs for $10,000," says Donovan.

Refurbished and used equipment can really save the day if you have a new project coming on board or a new application you want to bring online. If you have only a $50,000 budget and the hardware alone costs that much, buying refurbished or used equipment at half price can make all the difference.

So where do you get such refurbished or used equipment? The choices run the gamut from long-standing commercial companies that live and die by their reputation for selling quality used products, to someone on eBay selling a truckload of PCs that they've never tested and don't even know if they start up.

Look for companies that offer at least a one-year warranty on used equipment and make sure they have a system in place for testing and certification. The better companies also have technicians certified by the original manufacturer, like Cisco or IBM.

As good as the price of fully functioning server is, keep in mind that you probably will still want to maintain a homogeneous system. It is far easier to troubleshoot when all your servers are from the same manufacturer and even the same model line, notes Michael Kraner, president of an IT consulting firm in New York City.

Also, be extra careful if you intend to buy used networking equipment. There appears to be a certain amount of counterfeit networking equipment, so you may not get what you expect. Donovan says some equipment are such bad counterfeits, you can see they're phonies from the picture on eBay.

Refurbishers used to get a majority of their products from leasing companies, but now bankruptcy auctions are fueling inventory, says Donovan. Another source of this equipment comes from companies that are outsourcing and selling off a datacenter or two, as well as those who have spare equipment as a result of their virtualization and datacenter consolidation efforts -- both often make a lot of great and very current equipment available.

2. Buy equipment at auctions Another source for IT equipment is from local bankruptcies, says John Baschab, senior vice president of Technisource Management Services. There are 800 bankruptcy trustees in the United States, and these trustees (typically, attorneys are in charge of disposing of assets if a company has entered Chapter 7 bankruptcy proceedings) may have a favored liquidation firm for assets, and often one specifically for IT assets.

These auctions are a good place to pick up consumables like toner cartridges. If you go to the federal court system's PACER database, you can log in at a low cost and see what's available in your area. Of course, it is all cash-and-carry.

3. Max out current systems with high-performance components Donovan and others say what is even hotter than buying complete refurbished systems is upgrading current systems with new CPUs, memory, and disk drives.

Upgrading a three-year-old Hewlett-Packard server from a two-way server to an eight-way can run you 10 percent of the cost of getting a new eight-way server.

Be aware that if you go this route, used disk drives have a shorter life span than components without moving parts, such as memory modules and CPUs. Also note that adding RAM doesn't always help. If a computer is five years old, the experts we consulted say it won't improve performance.

If you upgrade older equipment, note that some manufacturers may deny your maintenance contract or warranty, as they will not include used equipment in the deal. Our sources say that Sun Microsystems is very belligerent about putting its equipment under maintenance if it wasn't bought directly from Sun or an authorized dealer. Sun does have a recertification program in place for such upgraded systems, but the price is high. On the other hand, IBM takes a more liberal approach and has a reasonable recertification program and process, according to the experts we consulted.

4. Part out your equipment While "parting out" -- recovering individual components for reuse -- is an old tradition among rebuilders of classic motorcycles and cars, it is a bit more problematic in high tech. You have to part out gear such as computers and servers selectively. It may not be worth the trouble in commodity desktops, but in networking and telecom, there are many cases where the parts are more valuable than the whole. Even spare parts have value.

5. Sell your old equipment IT equipment depreciates in value 2 to 3 percent per month. If you're a large company, you could be losing tens of thousands of dollars for every month that assets are taken out of service but not sold.

Asset disposition service companies help IT manage equipment through retirement, reuse, remarketing, and recycling. Companies like Redemtech not only handle the equipment, they typically have some system for categorizing used equipment, testing and certifying the operability, and assigning an appropriate condition code that helps both the seller and the buyer know what to expect.

However, does this mean your company is better off with faster refresh cycles to get higher value for used equipment before it depreciates, or is it better to squeeze every last ounce of productivity out of your current equipment before you refresh? Probably the latter.

Even though his company would love to sell your newer hardware because it's worth more, Redemtech CEO Bob Houghton says it's typically better economics to extend the lifecycle of equipment and give up the residual value. For each type of equipment, though, there is no formula to figure out the ideal time to retire and sell, as the application of that equipment and type of maintenance required vary significantly.

Once you've made the decision to refresh and sell, move as fast as possible. Once an asset is surplus, it loses value rapidly, so don't stick it in a warehouse and let it age for three months. And don't look at such sales as merely a scrap-iron deal: Many assets can be refurbished and provide more value.

Use a consignment model if you go with an asset disposition firm, rather than a buyout. In an outright buy, the purchaser (in this case, the asset disposition firm) tries to pay the lowest price possible, while in the consignment model, the firm takes a percentage as commission, so it has an incentive to get the best deal for both of you.

6. Redeploy what you have In any large distributed organization, there is always a certain amount of churn, and IT should take advantage of that churn for refurbishment and redeployment. On average, every dollar spent to redeploy a company can defer $14.50 in procurement costs, says Houghton.

And you can redeploy much more than just PCs, Houghton says. "Virtually everything in the IT portfolio should be looked at as redeployable as long as it can fit in with the company's hardware standard," he says. "If it doesn't meet the standard requirements, then retire it."

7. Sell equipment to your own employees If the other methods to sell your unneeded equipment don't make sense, you always have the option of selling it your employees. But having something like an in-house silent auction to sell off old equipment to your staff can be a double-edged sword.

On one hand, it can be a way of giving your employees a kind of bonus during the hard times. On the other hand, like selling a used car to a friend, there is a good probability it will come back to bite you. If the system develops a problem, the employee will still hold IT responsible. If you're going to do this, make clear it is sold "as is" -- and stick to that.

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This story, "Easy Ways to Cut IT Costs You May have Overlooked" was originally published by InfoWorld.

Copyright © 2009 IDG Communications, Inc.

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