August 5, 2015

Squeezing to Perfection: Rearchitecting IT Productivity

CIO Strategy Exchange, New York, 2009

“Less is more”
– Mies van der Rohe, (German-born Architect), 1947

Scanning the Pundits
This CIOSE Report centers on innovations that structurally reduce IT expense without reducing useful capacity. We began by scouring the business and trade press along with more obscure sources for insights to help guide our interviews.
The best articles are summarized below.

Opportunities? Bleak economic times open opportunities unlikely to emerge in a cushier environment. After all, the downturn of 1974 witnessed the commercial birth of microprocessors, SQL, and graphical user interfaces. The stagflation of 1981 brought the IBM PC. The 1991 collapse coincided with the introduction of Linux and the Web. Another happy burst of technology could be on the horizon, witness the flurry of credible new technologies now reaching market strength. What to do? Seize the moment and recruit mid-level technical managers familiar with clouds, virtualization and the latest thinking on collaboration. (Computer Weekly, March 30, 2009)

Telecommunications outlays per employee have doubled since 1996 because of booming connectivity via smart phones, plus 100 percent growth in bandwidth consumption. Nonetheless, a material portion of the increase is pure slop, says Mining telco bills will yield major savings for business customers. You’ll find charges for disconnected and unused cell phones, wire lines, voice mailboxes and even pointless call-waiting on fax lines. And some especially tight-fisted firms are investigating clever initiatives like teleconferencing services that offer flat monthly rates. Others are buying nationwide minutes at depressed bulk rates for cell phone long-distance calls. (Aberdeen Group, 2008)

Capacity Trends: Absent countervailing actions, data center operating costs are rising faster than the six percent growth in overall IT expense. Electricity costs alone will increase 11.2 percent annually – without any server growth, reports IDC. And that’s unrealistic. Overcapacity is going to be a chronic cost problem for several reasons. Server utilization typically tops out at 10 percent without ongoing intervention. Then add spiky workloads and the unpredictable usage that can only be accommodated with surplus capacity. Enter clouds – more flexibility for irregular workloads and all around energy efficiency. (Cabot Group, March 2009)

Management Tactics. Infrastructure is the target for the most interesting of 25 cost-cutting ideas, some with benchmarks: a) accelerate shared services for 20 percent savings. b) reduce reliability targets by one “9” for 30 percent infrastructure savings. c) designate the Internet as corporate transport for up to 80 percent savings on existing links. d) virtualize servers. e) deploy VOIP. f) focus on “unmanaged” expenses like power and printing. g) target two areas for experimentation with zero-based budgeting. (Gartner Group, October 2008)

Open Source Software becomes more appealing in this economy, with Europe leading the United States. The obvious advantage over proprietary alternatives is acquisition price; the disadvantage is (sometimes) higher support expense. The economics of open source becomes especially favorable when a company has an application that must be installed on multiple servers or, better yet, in hundreds of locations. Proprietary package suppliers would exact their license and maintenance charges for every instance; open source support costs might be incurred just once. (The Economist, July 9, 2009)

Contract Scrutiny: Keep a keen eye on contractual details and vendor charges. Institute tight controls over “non-core expenses” which are curiously defined as telecomm services, Blackberries, and travel. Renegotiate existing outsourcing contracts – though the article doesn’t say how. (CIO Magazine, March 25, 2009)

Squeezing Down: Deploy virtualization to increase server utilization from 10 percent to 50 percent. Orchestrate delivery of both hardware and software to postpone premature payments. Embrace the current crisis to negotiate more favorable terms from web-hosting and telecomm suppliers. But, contends the author, messing with software maintenance contracts will prove frustrating. (Computer Weekly, June 28, 2009)