10 ways to stretch IT budget

by By Jamie Yap , ZDNet Asia on February 21, 2012

As the shadow of economic uncertainty looms over Asia-Pacific, companies may be tempted to freeze or even slash IT budgets, but market observers note that this can be minimized with pre-emptive steps.

According to Lionel Lim, Asia-Pacific president for CA Technologies, the outlook for the region was still unclear. He pointed out the Asia-Pacific is home to many strong domestic markets, and not necessarily dependent on overseas customers. This meant that budgets could well be revised upwards or downwards later in the year as trends became clearer, he pointed out in an e-mail.

However, in case things take a turn for the worst, Sam Wong, advisory partner at Ernst & Young, advised that companies reexamine their practices as early as possible to help themselves ride out future storms.

John Brand, vice president and principal analyst of CIO group at Forrester Research, also emphasized a proactive stance when managing and maximizing IT budgets. He said organizations must first determine what they will need in the future to determine where they can reasonably cut costs now.

"Organizations need to be constantly placing themselves in the best position to reduce costs, and not wait till market downturns occur. Cutting costs should never be a reactive position," he highlighted.

Here are the top 10 ways Asia-Pacific companies can stretch their IT budget dollar to boost their efficiency and agility.

1. Work it out with vendors
According to Brand, most organizations are hesitant to directly approach their suppliers and ask for a better deal. "The old adage, 'you don't get what you don't ask for', is particularly true here. He added that organizations often see centralization or consolidation as a panacea to lowering costs, yet having a few so-called strategic partners may actually introduce greater costs with few quantifiable benefits.

Hence, organizations should constantly reevaluate the market and seek alternative providers which can deliver similar services at lower prices. Even though they may not be selected, having information about potential alternatives can help with contract negotiations in competitive situations, Brand said.

2. Get best of breed
Lim said companies should seek to assemble best of breed by looking for technology or vendors that can bundle the most efficient and available resources from different IT environments. Existing systems may have overlaps in management functionality, service deliveries and other redundancies that can be eliminated through this exercise, he pointed out.

The added bonus is that this shift ensures user satisfaction can be easily addressed, productivity improved, and maintenance costs potentially reduced as well, he said.

3. Move to mobile, BYO
Remote or mobile working and bring-your-own device initiatives can help reduce the investment in assets owned by the organization, making a significant impact on the bottom line, Brand noted."The whole point is to remove as many enterprise IT assets from the balance sheet as possible. It can also reduce the load and cost of providing associated support."

4. Commit to and cross-train IT staff
Wong said upgrading the skills of IT personnel makes them more effective and easily redeployed.

Brand noted that it was not uncommon that training programs were the first costs to be cut in any organization, though this can be "entirely self-defeating". With lower-skilled staff, an organization is inevitably putting its longer-term future at risk, he cautioned. Instead of reinvesting in training programs, companies can lay out a clear roadmap of skills required by staff, which may help motivate them to find and fund their own training, he noted.

Brand added that companies can move IT staff into more business-oriented roles. As the role of IT evolves, and businesses start to make more technology-related decisions themselves, some IT roles can be subsumed or reassigned back into higher-value business tasks, he explained. "[This] doesn't always cut overall business costs, but it does remove IT headcount from the balance sheet and helps gain more value from what you're paying for," he said.

5. Be platform-agnostic
Lim said: "Considering there are not many, if any, data centers with homogenous platforms, it is sensible to look for technologies that enable flexibility and productivity." This will allow businesses to shift resources across platforms easily to achieve greater innovation and growth, rather than stay siloed and bogged with maintenance and operations, he noted.

6. Simulate before you spend
Lim advised: "Before you request-for-proposal (RFP) and request-for-quotation (RFQ), do a simulation [and ask] what exactly are you solving and/or offering?" From the onset, the company must think about optimizing the design and effective deployment of applications and services. This can be done through modeling or simulating what their performance, integrations, security, capacity requirements and costs before any actual investment is made, he said.

A company will then be able to identify the strengths and weaknesses of proposed applications and services without having to need to develop software that must be tested and refined before they go live, he added.

7. Spring clean, and come clean
Companies must look how they allocate their IT budget between purchasing new technologies and maintaining existing ones, Lim said. "Over the years, you may have lots of legacy hardware and software just taking up space or chugging along. Take a good, hard look at what you have. Very often, you may not need to buy more, but manage the existing infrastructure better. Pay for only what you need."

Wong similarly advocated that companies carefully evaluate their IT procurement. This would mean comparing fixed and variable costs. "Does the company really need its own data center? This will call for a decision to buy or lease, and in-source or outsource," he noted.

8. Consider open source alternatives
Companies can also think about using open source alternatives to defray costs, although the reality is that some open source products will suit some companies more than others, Brand said. "Not every organizations will reap the benefits and cost savings from open source, but they should always consider it."

9. Cut down on low priority projects
According to Brand, this is not strictly cost-reduction but cost effectiveness. Organizations may have a long list of strategic and tactical projects, many of which are reprioritized throughout the year, increasing costs and introducing significant business delays. He suggested that by concentrating on only the core business requirements and projects--and sticking to them--costs can be avoided or at least minimized.

10. Try cloud
Wong suggested that companies review their hardware mix and configuration during their next technology refresh cycle, and consider leveraging on virtualization and cloud computing.

Lim agreed, noting that infrastructure-as-a-service (IaaS) cloud services can be one way of gaining more storage or compute power relatively cheaply. In addition, software-as-a-service (SaaS) cloud services can ensure a company uses the latest versions of software applications.

(sources - http://www.zdnetasia.com)

Five “Gotchas” When Negotiating an Outsourcing Agreement

by David Mitchell, Senior Consultan

While reducing cost is typically the primary benefit of outsourcing, you also want an outsourcing agreement that allows you to realize your immediate and long-term delivery needs, provides contract flexibility and ensures that you receive maximum value for the money you will be spending. To meet those objectives, pay careful attention to the five “gotchas” noted below.

Negotiating a good outsourcing agreement involves much more than just achieving the pricing you desire. As you go through the process, you will go through the normal “give and take” discussions as you work with your potential provider(s). However, it is important that you do not focus solely on pricing. While reducing cost is typically the primary value proposition for outsourcing, you also want an outsourcing agreement that allows you to realize your immediate and long-term delivery needs, provides contract flexibility and ensures that you receive maximum value for the money you will be spending. To meet those objectives, pay careful attention to the five “gotchas” noted below. These areas of the agreement, if not carefully structured, can drain value from your business case and decrease the probability of having a successful and sustainable outsourcing agreement.

1. Statement of Work

A Statement of Work (SOW), when created correctly, describes in great detail (typically 100+ pages for a full information technology outsourcing agreement) the services to be performed by the provider and also clarifies certain client responsibilities. The SOW describes WHAT will be done for the price. A few checkmarks in the wrong responsibility column or a handful of missing tasks can significantly change the amount of service the provider is to deliver and will result in misaligned expectations from the start of the contract. Because the SOW is the “meat” of what the provider will do for you, you need to ensure it fully describes the services you expect from the provider.

2. Service Levels

Service levels work in conjunction with the SOW to scope the services that the provider will deliver. They describe HOW MUCH and TO WHAT EXTENT the services described in the SOW are delivered. Service levels and assumed labor costs are two primary drivers in a provider’s cost model. It is important that the service levels reflect what you need even as you are negotiating price. Importantly, you should realize that the costs go up exponentially as you get closer to a 100% performance target. Outside consultants with market information can help you determine a fair price for the service levels you require. Additionally, there are important service level terms that should be included to allow you the freedom to add and change service levels and to re-allocate service level credits as your business needs change.

3. Termination Language

It can be hard to focus on termination language and termination charges at the beginning of an outsourcing relationship. Termination language is analogous to a prenuptial agreement – it is there “just in case” things do not work out as originally intended. As the final negotiations occur, you may be tempted to give a bit on the termination language in order to get to the price point you want. Depending on your starting point, some “give” might be acceptable but you first need to understand the ramifications if you need or want to get out of the agreement (or pieces of the agreement) in the future. Once the contract is signed, it can be especially difficult and costly to get out of it if the termination language is favorable to the provider.

4. Future Pricing

There are a number of factors to consider regarding future pricing. On the whole, you should expect your IT costs to go down over time due to improvements in hardware and software functionality and pricing, labor arbitrage, automation, and so forth. Because each situation is different, there are no easy “rules of thumb” to apply, but pay close attention to these specific areas:

• Year-over-Year Pricing – You should expect the unit pricing for most towers (possibly excluding applications due to its labor-centric nature) to go down each year, with the provider accepting the risk of continuously improving and streamlining its operations to achieve lower price points each year.
• Cost of Living Allowance (COLA) – From your perspective, it would be ideal to not have a COLA, but the reality is that many providers will require it to give some risk protection in the out years. Any sort of cost of living increases should be tied to a well-known government index. Each tower should have a “COLA index” that indicates the portion of the unit pricing that can be affected by a COLA index. They should be country-specific if you will be receiving labor from an offshore location, and they should be capped to reduce your risk.
• Variance Pricing – Many outsourcing contracts contain variance pricing based on resource usage. An assumed number of resources are built into the annual price, and then adjustments are made up or down based on actual monthly usage. The concept is simple, but you need to watch for how that will work for you based on your future growth assumptions. For example, if a provider expects that your business will grow over time, they may propose a lower base price to meet your initial price point, but then have a relatively high additional resource charge, or ARC rate, for additional volume.

5. Delivery Locations

In return for hitting your price point, a provider may want to include the freedom to deliver from whatever location they see fit. There are many risks associated with movement of work from one team to another, much less from one country to another. Because of the potential impact to your business, you want to make certain that you have some sort of approval authority prior to the movement of support functions. The provider may counter that they are accepting the risk because they are signing up for service levels. However, the potential business impact to you is much greater than their risk of incurring service level credits for missing a couple of metrics.

In summary, these five potential “gotchas” need to be managed closely through the negotiation process. Due to the variations and complexity inherent in each deal you should strongly consider the use of an outside outsourcing advisor to help. Because they understand your perspective as well as the providers’ point of view, they are ideally positioned to help manage through these items (as well as the many other items that will arise) and develop an outsourcing agreement that works well for both you and the provider.

(Sources - http://www.outsourcing-center.com)

The 7 rules of successful IT outsourcing

How can CIOs protect themselves from the risks associated with outsourcing

By David Miller, Senior Consultant, ImprovIT | Computerworld UK | Published 16:19, 10 May 11

There is one thing about a honeymoon period that is universally true: it never lasts forever. So it is with IT outsourcing. No matter how promising the vendor relationship, no matter how ideal the solution and no matter how capable your outsourcer seems to be … the chances are better than even that at some point the project will be stopped - either permanently or temporarily.

This is especially the case with complex, enterprise-wide implementations like the electronic patient record (EPR) in the case of healthcare, or Enterprise Resource Planning (ERP) in the corporate supply chain. As a rule of thumb, the more ambitious the project, the more room there is for scope creep, budget blowout, integration glitches, software bugs, testing failures and a variety of other downstream nightmares. In the worst cases, the catalogue of problems can be so extensive that multi-million pound projects are just quietly shelved, on the basis that what is required to bring the project into production faces the law of diminishing returns.

So, how can CIOs protect themselves from all this? How can they ensure that the burden of risk is on the oh-so-willing vendor and not on themselves? Well, here at ImprovIT we have put together seven rules of outsourcing which aims to ensure clients have the tools they need to a) negotiate the best price and b) ensure supplier contracts are framed in a way that favours the client - safeguarding them from these unforeseen risks.

1: Where possible enter into collaborative procurements. This is a growing trend in both the commercial and the public sector whereby organisations club together in new infrastructure projects or hardware renewal cycles for volume pricing advantage. Providing their aims are collaborative (which should be ascertained first), this collective bargaining can be very effective.

2: Know you know what you want. It is crucial that you are clear on the needs of your stakeholders and have made sure the vendor fully understands your requirements before work begins. Anything that is vague or relies on ‘figure-it-out-as-you-go’ may seem OK in the feel-good flush of a new relationship but loose ends can come back to haunt you when things get tough.

Unless everything is nailed-down, itemised and agreed upon upfront, it’s often difficult to predict the levels of complexity involved in the project. As implementation progresses, new requirements may be discovered and goal posts may shift. Unless the formal specification documentation is precise and contractual, vendors may be tempted to use any grey areas to either cut corners or add costs which can rapidly mount until they are out of control.

3: Always do your due diligence. You and your project team must be convinced your supplier has the track record to deliver. Since expensive, time-consuming legal redress for below-standard results and broken contracts is not a valid option. Take the time to speak with users and visit reference sites and companies that have been on the receiving end of the vendor's services. It’s odd that many customers will spend vast sums on a software installation but not take the time to see the solution in production.

4: Be proactive on pricing. Whether it’s a solution or service, don’t count on your supplier to point out the most cost-efficient options. By example, IT Service Level Agreements (SLAs) can be notoriously opaque and the terms often tend to favour the service provider. Unless specified, you may find on digging into the contract that you are paying for a premium 24/7 level of support when a 9-5pm/5 day one would be perfectly adequate.

5: Compare before you buy. It’s not always easy to work out if you are paying the fair market price for a service or solution, as it involves comparing different suppliers, each of whom bundles their products differently. This makes it difficult to break offerings down into components so that they can be compared on an apples-to-apples basis. And even if you could do this, market pricing data of this type (involving highly detailed service catalogues) is typically only available to specialist outsourcing consultancies.

6: Insist on phased delivery. Too often the first time a company sets eyes on its new software application is when it takes final delivery. At which point the vendor is paid and moves on, and the IT team is left to iron out the bugs – a process that can take longer than the build itself. Worse still, not infrequently the solution turns out to be something other than what was wanted. A simple way to avoid this is by insisting on a staged/agile delivery (and staged payments) so that each module can be tested and confirmed as fit for purpose.

Another way to avoid problems is to insist the vendor be responsible for all aspects of system implementation including guarantees that it performs as promised, is delivered on schedule and is maintained for its entire lifecycle.

7: Maintain the dialogue. Sometimes customer/outsourcer relationships break down simply due to lack of communication. This is most likely to happen when the service provider has taken over offsite management and maintenance of a company’s whole IT operation. Without clear direction from the client, or with messages left unreturned, drift occurs and a frustrated supplier can end up taking decisions by default, thus taking the client’s IT strategy in unintended directions. Or extra ad-hoc services are ordered by different departments directly with the provider without going through any internal management. Sometimes this activity only comes to light with the annual audit of outsourcing spend, with the CFO wondering why costs have exploded. Remember, to make outsourcing work, responsibility lies with the supplier AND the customer.

There are at least another, equally valid, set of rules for successful outsourcing but if you can tick off all of the above, then you are ahead of the curve in best practice sourcing.

(Source : http://www.computerworlduk.com)

How the University of ADELAIDE manage their ICT - something to learn from them

ICT Principles

These ICT governance principles were agreed at a joint meeting of the University Information and Communications Technology Committee, the University Information and Communications Technology Architecture Committee, and the University Information and Communications Technology Investment Committee held on 16 June 2009. The principles constitute a reference model by which new ICT initiatives can be assessed for their alignment with the University's ICT ethos. Principles are a tool to help make more informed decisions - they are meant to guide rather than mandate.There is a set of over-arching ICT guiding principles that provide guidance on the key motivators that influence IT decision making together with more detailed sets of IT architecture and investment principles.

ICT Guiding Principles

The strategic direction of, and the decisions made by, the University Information and Communications Technology Committee on behalf of The University of Adelaide will be guided by the following principles. Information and Communications Technology (ICT) at the University of Adelaide will;

G1. Enable the University's core business - excellence in research and teaching. G2. Deliver a rich, engaged student and staff ICT experience. G3. Promote operational efficiency. G4. Ensure systems are robust and agile. G5. Ensure information and systems are secure. G6. Manage ICT as an investment.

ICT Investment Principles

The Investment Principles are necessarily aligned with the guiding principles but provide more guidance on investment.

I1. ICT investments must positively contribute to the achievement of the University's vision and goals as outlined in the Strategic Plan. I2. When considering potential ICT investments, the full life cycle costs and implications including licencing, infrastructure, skills and resources will be considered. I3. ICT investments will be assessed on the basis of the return on investment they offer. It is recognised that the potential returns are not just financial, and in some cases qualitative assessment of non-financial benefits will be required. I4. Individual ICT investments must demonstrate alignment with the overall University ICT strategy. I5. The potential business risks associated with ICT investments must be assessed and appropriate mitigation strategies identified prior to investment approval.

ICT Architecture Principles

The Architectural Principles are necessarily aligned with the guiding principles but are more focussed/detailed on Business, Application, Data and Technology architectures.

Business Architecture Principles

B1. The Enterprise Architecture is based on a design of services which mirror real-world activities which comprise the University business processes. B2. A partnership will be cultivated between the various Faculties and business units and ITS, in order to work together towards the attainment of the University's strategic goals. B3. IT investments will be aligned with the strategic goals through a planning and architecture process to implement appropriate enterprise solutions. Hence the architecture, (i.e., the business, information, application, and technology models and principles) will guide the design, implementation, and management of technology assets based on business needs. B4. Business processes and associated IT solutions will be sufficiently modularised and flexible, allowing greater agility and rapid implementation of changes to business rules and processes to facilitate emerging opportunities and evolving needs. B5. Business processes, data and supporting applications will have documented owners, who will be responsible for defining the associated business requirements (e.g., access, validation, maintenance, etc.)

Data Architecture Principles

D1. Information is a corporate asset which should be captured, stored and managed in a way that will allow appropriate levels of sharing across the enterprise. All primary data will be captured once only at the point of creation, and stored and managed to enable appropriate levels of sharing and access. D2. Timely, accurate and complete decision support information will be made available to authorised users through standard tools. D3. Applications will access data through defined interfaces (i.e., through data service brokers rather than directly at the data storage interface) using standard data base and file management facilities.

Application Architecture Principles

A1. When deciding on architectures to implement, the preference will be to leverage and reuse existing solutions, second to purchase new package solutions, and thirdly to build custom solutions. A2. Implementation of applications used across the enterprise is preferred over the implementation of duplicate or similar applications for particular groups. A3. Future applications will be delivered via the Intranet and Internet as web based applications, preferably deployed through key Portals. A4. Application programs, whether purchased or developed internally, will be architected to separate business rules from application logic and provide modular, reusable functionality. A5. Implementation of applications will be managed through defined roadmaps which cover the full application lifecycle.

Technology Architecture Principles T1. The University will be agile, proactive and innovative in its use of technology to provide services T2. Technological diversity is controlled based on a defined set of standards and policies to ensure that IT services are efficient, sustainable, robust and secure.

(Ref : https://www.adelaide.edu.au/infrastructure/strategy/governance/principles)