IT Outsourcing Cost saving quick wins
So how can you do the same for less? As we all know it’s not just the private sector that is under cost pressure at the moment. So if you are the CIO or Head of IT in the public sector what can you do when your boss tells you that you have to cut costs?
The IT landscape in the public sector is varied with services frequently being provided by a combination of in-house teams and IT service providers. You have most probably looked at your organisation many times before and feel that you have done all you can to minimise costs?
Whatever mix applies to you there will most probably be some costs that are fixed and some that are variable or discretionary. So what can you do?
Quick wins, cost savings or “Doing the same for less”
In-house
The IT services that you deliver in-house are likely to mainly consist of hardware and software. First ask yourself how do you pay for licenses? There are many models – site license, organisation, licenses used, number of staff etc. If it is a variable model check to see if you need all the licenses you are paying for and if not get your license fee reduced. Be careful with this one as most organisations are under licensed so this could cost you more money! Hardware costs consist of acquisition costs, that will most probably be shown in your balance sheet and on-going maintenance costs. For the one-off hardware acquisition costs ask yourself: can I defer buying new hardware and sweat the existing assets for another year? If yes, then you could save money this year but remember this may only increase costs in later years. You could change the brand of hardware you use to a less expensive range, although this may have an impact on reliability etc. This is one area where a saving made could have a major impact in other areas by increasing maintenance costs
Outsourced services
Depending on your contract you may or may not have an easy route to reduce costs. Some contract charges will be fixed based on a level of service while others will be made up of fixed and variable charges, the variable element usually driven by volume and a unit charge. For example, desktop services could be calculated by multiplying a charge per desktop by the number of desktops. If the number of desktops reduce, so will the total charge. For the variable elements of your service look at the number of units that you need and see if this will deliver a reduced charge. There may also be a different charge for different levels of service so review who needs what level, and hours, of service. This will especially relate to support where you may have 24 hour cover for certain services. Is this really needed? If not, reduce the service and reduce your costs.
In the absence of any formal contractual mechanism to reduce charges, you can also ask your supplier what they can do to reduce charges, and give them a target. This will take longer than using a formal existing provision in a contract, but has been successfully used many times.
Also look at what your supplier should have been paying you – service credits. Many IT outsourcing contracts have the provision for service credits to be paid (often as credit notes) to customers for poor levels of service, but all too frequently these are never exercised by the client. This could be as much as 10% of your fees so it’s worth checking. You may even be able to recover un-claimed credits going back over a number of months!
Another area that is worth looking into is your use of communications and network services. If you have many offices or external links you may be paying for voice and data links. Are you paying the right amount for the right links? In many organisations these bills are paid without any review and sometimes links and network traffic will be paid for that is no longer used or even worse, items may be on your bill that are for another customer! The solution is to regularly check your Network bill.
You may also be planning to spend money on IT projects, whether they are infrastructure or new business applications. The first question is can the project be cancelled? Can it be deferred, or the scope reduced and? Finally can it be delivered for less? Delivering a project for less is interesting. Even if the project cannot be cancelled it is worth looking again at the scope etc to see if elements can be cut and hence reduce delivery costs. IT Project costs are likely to be made up of resources, hardware and software which could be in-house or sourced from a third party. If In-house costs are fixed by using all permanent staff there may not be much leverage to reduce overall costs. However, if the project is due to be staffed by contractors or delivered by a third party you may be able to reduce costs. Can you move it from T&M to fixed or capped fee for more certainty? Can the third party use a different mix of more senior and junior staff? If you are using an IT service provider you could also ask them to use offshore resources that may again reduce costs.
Quick wins - reality
So how should you feel if your boss asks you to save money against your already tight IT budget? I hope that after reading this article you have a few new ideas to add to your own list and that you can see that just when you thought the IT savings cupboard was bare that there may be more savings lurking in the corners.
About the author
Tony Adams is a Senior Manager with Alsbridge plc, the award winning advisors on outsourcing, shared services and offshoring. Tony can be contacted at tony.adams@alsbridge.eu or on +44(0) 20 7242 0666.
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