With data center operations, equipment maintenance, staffing and licenses consuming the lion’s share of today’s IT budgets, companies can gain a great deal by optimizing their current operations.
Given the current recessionary environment, technical expertise, strong budgetary controls and procurement discipline are more critical than ever to maintaining operating margins.
Across the board we are seeing organizations taking on smaller, quick hit projects to balance spending and risk. Conversely, most companies are postponing or scaling back major transformational projects as managers look for rapid ROI either by better utilizing the technology assets they already have or by undertaking initiatives with shorter implementation times and faster paybacks. Not surprisingly, fewer companies are willing to fund multi-year projects that will not begin paying back their investment for 18 to 24 months or more.
But saving money is never easy. Many initiatives to reduce recurring long term costs are complex and expensive endeavors in themselves and especially difficult to implement during a recession. Even in the best of times, such projects warrant a thorough technical and financial analysis to make sure they align with the company’s business direction and economic goals.
My advice for CIOs and their enterprises is to continue to invest in solutions that deliver well-defined results that at the same time minimize disruptions to employee productivity. You may be surprised how many projects can produce a healthy ROI in just nine months or less. These are the initiatives that will easily pass muster with your CFO and executive team.
Here are two examples of how taking a fresh look helped two companies save significantly on OPEX and CAPEX – delivering faster value to their organizations:
Example 1: How we saved $17M and moved one year early
A Fortune 1000 manufacturer planned to relocate to a new data center at a projected cost of $17 million. The company’s facilities manager had spent months considering the move and was among the chief advocates for building a new data center over the next two years. He knew facilities (but not data centers) and his site selection was based on traditional real estate values — size, location and cost — which, unfortunately, do not always translate well into data center requirements.
Fortunately, with some outside help, the company took a closer look at the proposed relocation, set aside its internal preferences, and a $17 million mistake was avoided. The company discovered that it would need to install a fiber ring connecting the new data center at a recurring cost of $500,000 per year. On top of that, the new facility would not have sufficient cooling capacity for the anticipated power load.
By starting with the requirements, not the real estate, the company found suitable colocation/lease space with total annual costs equivalent to the fiber trunk expense alone. By going into a collocation facility with multi-carrier access, the fiber trunk requirement was eliminated, facility construction costs were avoided, and the cooling problem went away. On top of this, the client moved into the space one year ahead of schedule.
The moral of this story is that in-house employees, and even senior managers with lots of experience, can become cheerleaders for projects that keep them in their comfort zone or may even seem to guarantee long-term job stability. Companies need to spend some effort on understanding that which is less familar and looki in unfamilar places for fast payback rewards.
Example 2: How to save $300,000 per year and improve service
Large enterprises with big IT operations and large facilities staffs typically have multiple departments reporting to different parts of the organization. It’s not uncommon for such groups to operate in silos, ignorant of each other’s systems and operations.
For example, a major Boston-based investment firm’s IT infrastructure had grown over the years through mergers and acquisitions and by decisions made by department heads who didn’t communicate.
As the company became alarmed by its ballooning IT budget, it sought help from an independent IT consultant with no ties to a specific hardware vendor. After looking at all its processes, the company discovered that it was spending $2.7 million annually on a jumble of security systems with many overlapping features. Worse, these systems were installed in a cascading fashion that created management headaches and performance bottlenecks.
By redeploying the existing technology more effectively and retiring unnecessary systems, the company immediately cut annual fees by $300,000 per year while improving manageability and performance.
Stories of the left hand not knowing what the right hand is doing are rampant in business. The lesson here is that taking a full inventory of systems and services across all groups is an important first step in consolidation and cost containment.
As you search for new ways to deliver value, don’t forget to take a hard look at areas that you may have forgotten during the boom years. Be open to questioning your internal biases and the ways you’ve always done things. There are many places you may be able to recover budget simply through smarter operations.
As always, I welcome feedback, questions and comments. You may reach me at firstname.lastname@example.org.
Michael Bullock is the founder and CEO of Transitional Data Services (TDS), a Boston, MA-based consulting firm focusing on green data centers, data center consolidation / relocation, enterprise applications and technical operations. Prior to founding TDS, Bullock held executive leadership positions at Student Advantage, CMGI and Renaissance Worldwide.