Ten ways to optimise your IT budget

Speak to any executive board member about IT and they are probably more likely to point to their PDAs or Blackberry devices, that keep them in touch with emails, than anything else. Mention IT in relation to the business, however and references will be made to cutting back on the IT budget for the next financial year.

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By  Kevin Reed Published  March 13, 2006

Ten ways to optimise your IT budget|~||~||~|Speak to any executive board member about IT and they are probably more likely to point to their PDAs or Blackberry devices, that keep them in touch with emails, than anything else. Mention IT in relation to the business, however and references will be made to cutting back on the IT budget for the next financial year. In other words, CEOs are often as far out of the loop regarding their company’s IT strategies as anyone can be. Businesses without an IT director on the board will frequently hand out overseeing responsibilities for the department, often grudgingly accepted, to the chief financial officer. Yet technology is again revolutionising the workplace. The first sea change led to PC take-up, limited connectivity across the business, with finance functions poring over figures on shabby spreadsheets. Now the incredible spread of the internet is living up to its promise of creating a global marketplace. In the background, organisations are finally seeing opportunities to accurately gather business data and spread it through the company to create ‘a single version of the truth’. Mobile technologies, which can be used to view or input data, have become powerful business tools for both white and blue-collar workers. Yet, the bosses are looking to trim IT spend again. A business that uses IT to attain its goals, rather than just for the sake of using the latest trendy piece of kit, is a powerful one. IT needs to be a board-level issue. This can be attained through many means, appointing a CIO, for example, but for CEOs, it simply requires pro-activity. Here are ten examples of trends and new technologies that, with just a basic level of understanding, could help IT budgets be utilised more efficiently. Pro-activity on these topics instead of alienating the head of IT, will make you feel that your department can make a difference, perhaps also encouraging you to take a more strategic, business-focused, outlook to your own role. 1. Software licences Managing your organisation’s IT hardware and software has become a big risk management issue, one that could well involve the help of a risk control specialist or incumbent CFO. Employees using unlicensed software carries two major risks. Firstly, software authors such as Microsoft are extremely aggressive in protecting the use of their products, and will sue businesses that use software without purchasing it. Secondly, illegal or copied software often carries bugs or viruses, which can crash systems and lead to expensive downtime. Even if IT assets are well managed, there is another issue around the corner. Impending launches of Microsoft’s latest version of Office (version 2007) and Windows (called Vista), will have IT directors licking their lips. All very nice, but if your company invested in brand spanking new desktop PCs and software last year, there’s no rush to buy in new versions. 2. Software as a Service (SaaS) As well as being careful to manage software licenses, many organisations have chosen not to use licensed back-office applications at all. Instead, they are using applications hosted by an internet provider. A tremendously popular customer relationship management, internet-based application is hosted by Salesforce.com. A relative newcomer to the business applications marketplace, it has won hundreds of customers across the globe. The advantages of using a SaaS provider? Licenses are operated on a monthly basis, giving you the opportunity to cut and run if another provider offers a more useful and/or better value application. More importantly for some, all users operate on just one version of the system, saving complex upgrades. 3. Outsourcing Despite the bad name that outsourcing has, the main players in the market – those based in Asia and Eastern Europe – are operating in what has evolved into a mature market offering distinct advantages to CEOs looking to be more frugal with IT spend. Don’t let your IT director nail your long-term business process or contact centre outsourcing deals over ten year periods. Think shorter and sharper. Your company doesn’t have to outsource to just one provider any more, shop around and blend outsourcing deals, or even bring some contracts back into the business, to best fit the company’s future needs. Despite some of the ‘urban myths’ involving stolen customer or client data, or infrastructure problems and power outtages, big players such as Tata, Capgemini and Computacenter all know how to outsource. 4.Create value by redirecting IT budget towards the company website Businesses have long recognised the importance of brand – representing the company through appropriate media, spending on advertising and promotions. Yet the internet has taken brands to brand new levels. Anyone, anywhere, can access your company website to find out what it does, how it does it, and how well it is performing. Many businesses operate successful commerce through the internet as well. Smaller businesses showing their wares can beat better-known corporates to clients through imaginative, easily navigable websites. Investors are also keen to keep up with businesses they have an interest in, via online means. No website equals no company to potential customers. 5. Voice-over Internet Protocol (VoIP) VoIP, or internet telephony, essentially brings together networks for both voice communications and data. Using broadband technology, VoIP can enable cheaper communications in various means. A business operating from different offices could have free phone calls between them using a VoIP line rental system. It can also be used to strategically route client calls to particular employees, whether they are in the office, in transit, or working from home. VoIP is scaleable, relatively simple to implement, and cheaper to use than traditional phone networks. ||**||Ten ways to optimise your IT budget|~||~||~|6. Use IT to help manage increasing corporate governance rules, not to solve them In a day and age where regulation and legislation weigh heavily on all large organisations, IT spend can be rife on projects designed to meet corporate governance objectives. So if your company is dealing with Sarbanes Oxley, International Financial Reporting Standards (IFRS) and Basel II governance issues, make sure a more business-oriented overview is taken to handle these ‘problems’ as a whole, and with a focus on making the business work more efficiently. In general terms IT spend should be treated more strategically, and on a separate budget to the everyday running of other departments. With the implementation of new regulation and corporate governance rules, check that project teams have been set up and informed, involving all departments affected by the changes – not just IT. 7. Treat IT directors as CIOs One of the most valuable ways to get the best out of your IT department is to involve the head of the department as part of the management team. This could involve replacing an introverted IT director with a CIO – a person looking to drive business strategy using technology. Fewer and fewer businesses leave the head of IT under the thumb of the CFO anymore. A good CIO will understand the IT nuts and bolts while helping to form strategy at board level. The biggest companies in the world use CIOs effectively to drive change. A good example is former BG Group CIO Steve Lamey, who led a global rollout of SAP technology to standardise core business processes, driving return on investment. Analyst business Gartner has stated that CIOs expect to be more ‘externally focused’ and play a significant role in business growth and competitiveness in 2006. Check your contact book, old work colleagues and recruitment agencies and pick one up now. 8. Use IT to efficiently control budgets and provide more useful management information Business intelligence tools are all the rage for vendors at the moment. Any organisation that is better at pooling together disparate silos of data and manages information through new tools, will be a step ahead of its rivals. Providing key financial data throughout the company, accurately and in real time, is an invaluable and often unattainable asset. Companies such as Cognos, Hyperion and Business Objects have acquired smaller, niche players and now provide a suite of applications, from budgeting and planning, to analytical and dashboard-oriented tools. Smart companies are looking to move away from spreadsheet-based applications, which have little integration to core transactional systems and are an inefficient process for reporting key financial information back to the business. 9. E-procurement Better procurement policy management is linked closely to managing internal organisational controls – a key feature of many corporate compliance programmes. Even CEOs ‘on top’ of corporate governance should make sure their company uses the most up-to-date technology to gain the cheapest and most consistent pricing for product purchases. As an example of the subject’s importance, an internal survey by Microsoft in 2003 found staff were paying dozens of dollars difference in price for blank CDs. A US $600 million global e-procurement strategy soon followed. 10. Grid technology IT hardware is expensive but depreciates at an alarming rate. Grid technology enables a company updating its IT infrastructure to purchase less data storage and fewer servers, while still maintaining the requirements of the organisation. Make sure the IT director picks hardware and software that work together efficiently. For example, Sun Microsystems’ hardware works well together with software giant SAP’s business applications. Ask US Ford Motor Company, French bank BNP Paribas or British Nuclear Group about grid technology. They are all keen users. ||**||

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