Cutting Information Technology Costs
April 1, 2009
I read CIO Magazine’s “Five Things You Need to Know: Budget Cutting” here and realized that there are journalists and their are more sophisticated financial types. Before you read the article, click here and learn how Qantas slashed its information technology costs.
Now you can romp through the tips and come away vulnerable to the machinations of a cost analyst. These tips provide a sense of false security which may give way to some even bigger organizational realignments in certain situations. One realignment may be suggesting the person who followed these tips find his or her future elsewhere. In short, there’s more to cost cutting that the tips suggest.
I don’t feel comfortable parroting the five tips. I want to highlight one and offer a few comments. Let’s look at item three:
Break down exactly how you spend your budget. Start by identifying your expenses. A CIO might know she has employees with BlackBerrys, but how much is each person spending on their phone bills? With more specifics, you can set more accurate goals for saving.
Sounds pretty safe, right? The problem is that analysis of a segment of a budget means that the numbers reflect the person’s understanding of costs. Most information technology managers are clueless about the secondary costs triggered by routine information technology actions.
Let’s look at one example. A marketing team must produce a proposal. The marketers named Trent and Wendy need to output the document in two forms: PDF and to an ftp server. The client wants to get ftp access on a Monday and receive the FedEx package with the six copies of the proposal no later than Tuesday, before 5 pm. The Trent and Wendy duo understand the PDF part, but neither knows how to move files to the organization’s ftp server. Trent calls the information technology department and asks for help. The IT person says, “We’ll be there before 2 pm.” The IT person does not arrive. At 5 pm, Wendy calls. The phone rings in space. Trent and Wendy call a consultant, explain the problem, agree to a fee for the ftp part of the job, and complete their work. The cost for the ad hoc consultant is lost in the organization’s budget. The IT manager and the CIO are clueless about the cost their unit created.
Sound familiar?
The problem with the recommendations is that the actions will not return a comprehensive picture. A true cost analysis will surface dependent costs and indirect costs, not just the obvious direct costs. Once tallied, these costs can be tracked back to the root cause of the over or under run.
In my experience, that’s too much work. As I learn about companies going out of business, the casual approach to cost analysis bites back and bites hard. Read the five tips. Track down a cost analyst and enlist his or her help. The present financial climate does not look kindly on those involved in projects such as search. It’s easy to blow through $500,000 in a matter of three or four months and have a non functioning system. Undisciplined thinking about enterprise systems and their costs can crush a career and an organization. The five tips omit that point.
Stephen Arnold, April 1, 2009
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[…] more here: Cutting Information Technology Costs : Beyond Search :cost, enterprise, financial, government, News, online-general, open-source, semantic, social, […]
And this is how Netflix cuts their search cost:
http://www.jroller.com/otis/entry/lucene_solr_nutch_amazing_tech
Easy cost analysis, IMHO.