Expect IT Budget Reductions
Virtually no part of the economy has been spared
from the impact of the global pandemic.
Unfortunately, IT budgets were not immune from the
effects of the virus, and CIOs will need to adjust to
new budget restrictions. As reported by CIO Dive,
Forrester expects that IT budgets will be nearly 6.3%
lower than they were in 2019. Forrester's Andrew
Bartels noted that CIOs should be examining cuts
they may need to make in areas like hardware and
new project spending, and what cuts they can make
to software, outsourcing and telecommunications
staffing. Complimenting Forrester's analysis,
Gartner's Chris Ganley observed that strategic cost
management is going to become important for
organizations to manage budget reductions. He
advocates that firms work to eliminate costs, not just
freeze them with the intent of implementing the
spend at a later date. The question then, is how do
CIOs efficiently make budget decisions that have the
greatest financial impact but the least operational
effect?
Using ITAM to Manage Hardware Costs
Clearly, as in almost all decision-making scenarios,
current and accurate information is critical. One
information tool at most CIOs disposals is a robust IT
Asset Management (ITAM) toolset. Using the reports
on the inventory, configuration of the physical assets,
software licensing and utilization and cloud assets, IT
management can identify under-utilized, obsolete and
excess IT assets. This information coupled with data
on maintenance costs for both hardware and
software spending, can provide a roadmap for
spending cuts that will have minimal impact on
operations.
When looking at hardware assets, perhaps the most
visible area of potential cost-elimination lies with
legacy systems. As CIO Dive reported, "failure to
modernize the tech space" can create wasted budget
dollars and potential lost business. At some point it
becomes more difficult and expensive to keep legacy
systems running where organizations will need to spend more to upgrade when those systems no
longer work. In addition, legacy systems can create
potential liabilities, particularly with regard to the
EU's General Data Protection Regulation (GDPR) law.
London-based Bird & Bird Attorney, Matthew
Buckwell noted that "The guidelines make it clear that
legacy systems are clearly in scope in the same way
as new systems, and if the legacy system does not
meet GDPR obligations then it cannot be used to
process personal data." He also noted that legacy
systems are a "key risk" companies face in potentially
violating the terms of the GDPR and the changes
may "add considerable cost for companies that rely
on older, integrated systems that are not easily
updated or removed." Firms can use their ITAM
solutions to identify legacy systems that may result in
non-compliance and use the information to take
remedial actions.
The inventory and configuration reports provided by
an IT Asset Management solution can quickly identify
legacy hardware. In addition, the software inventory
reports can be used to identify what systems the
legacy system impacts. Data from the system's
Configuration Management Database (CMDB) can
quickly identify the costs associated with operating
the legacy systems. This includes whether the system
is under a commercial maintenance agreement or if it
must be maintained by the organization or as a third
party, and if the software is no longer supported by
the publisher. This information can then be used to
decide whether it is cost efficient to retain the legacy
equipment or to allocate some of the capital budget
to replace it. In many cases it is more cost efficient to
replace older systems with new, thus reducing
ongoing costs well into the future.
Reducing Software Expense Using SAM
The Software Asset Management (SAM) component
of the ITAM software is a key tool in reducing
software costs without impacting operational
efficiency. According to Gartner, organizations can cut
software spending using SAM as part of three best
practices. The first action that Gartner suggests is to
use SAM to optimize complex software
configurations. The company reports that the default
configuration for most software is typically the most
expensive and by reducing the complexity and high
cost of the software offers an opportunity to cut
spending. A SAM solution can be used to identify the
components of the software configuration and
provide a roadmap for simplification. Gartner feels
that these changes are not obvious, and appear
simple in hindsight, but the savings to the company
could be in the millions of dollars. In addition to its
use in optimizing software configurations, SAM can
be used to recycle software licenses. Recycling
software licenses involves the recovery of unused
license rights for redeployment to avoid new license
purchases. Recycling software will reduce software
spending along with support and maintenance costs.
Recycling requires strong process control, which is
where a SAM solution provides critical information.
SAM allows a company to identify unused, underused
or misused software. In many cases a user may have a
piece of software installed that is never used or the
firm could own more licenses that it has users. SAM
tools can pinpoint these situations. Gartner
recommends the use of a SAM tool as part of
software cost reduction as it can automate, accelerate
and improve manual processes and will provide
dividends over manual alternatives, often paying for
itself. By using a SAM tool IT managers can identify
unnecessary software costs, make informed and
effective budget reductions with long-term benefits
while not impacting operations (Gartner clients can
read more in the report "Cut Software Spending
Safely With SAM.")
In addition to reusing under-utilized software, IT
managers can use the information on over-licensed
software to renegotiate both software licenses and
maintenance contracts. With the information on excess licenses, IT and supply-chain professionals can
tailor software agreements that are optimized for the
company's needs, lowering future software costs.
Managing Cloud-Based Assets with ITAM
It is axiomatic that companies can reduce IT operating
costs by shifting premises-based functions to the
cloud. However, cloud-based assets need to be
managed in the same way that traditional IT assets
are managed. That means monitoring server capacity,
data storage, software usage and licensing levels as if
they were behind the firewall. A comprehensive ITAM
solution can help IT management control cloud-based
expenses and manage the assets.
According to an article published by The ITAM
Review, companies can experience two or three
cloud-based renewals each week. That's in contrast to
planning for a Microsoft Enterprise Agreement
renewal for a year and a half. The key to strategic
contract renewals is to have the information that
enables the IT team to plan ahead. Using the report
available from the asset management component of
the ITAM system, teams can create a schedule of
renewals due in each fiscal quarter. Using their ITAM
solution IT management can identify three key data
points: a) when the renewal is due, b) the renewal
term and c) the contract value and the number of
seats covered by the contract. This information
enables management to target specific renewals.
Additional information needed to manage contract
renewal can be obtained from ITAM system reports.
Some of this data includes vendor name, the
departments the software supports and what the service is used for, the contract owner and the cost
center being charged, the usage levels and the value
to the operation. In addition, SAAS services can be
logged as service assets in the system, and their
monthly costs, user counts and utilization can be
imported from the provider's API. Systems that are
under-utilized or not critical to the operations can be
allowed to lapse, decreasing the strain on reduced
budgets. Collectively, this information provides IT
management with a multi-dimensional picture of its
cloud-based-assets and leads to better renewal
decisions.
Using the right ITAM tools, cloud-based assets can be
managed in a manner similar to premises-based
assets. For example, the ITAM tool can discover cloud
assets in the same way that it discovers networked
assets. In doing so, management can identify
duplicate contracts, services providing excess server
or storage capacity and contracts initiated by
individuals (a.k.a "ghost IT") that are being charged to
the IT budget. This information can be used to
eliminate or reduce costs, while not impairing
operations. Similarly, the system can discover more
information about the cloud assets from service APIs
such as GCP, AWS, Azure, thus providing IT
management with a clear picture of what services are
being provided, utilization and capacity. In addition,
the right ITAM system can integrate with other tools
and web services that contain detailed information
about the company's cloud assets.
Summary
Intelligent IT spending is even more critical when
budgets are under review due to the global downturn
caused by the pandemic. In addition, IT assets are
more important than ever as they are critical to
supporting remote workers, especially in
work-from-home environments. Consequently, it is
important to have as much information about the IT
infrastructure as possible when making budget
decisions. With the right information at hand, IT
management can potentially identify areas where
budget reductions can be made without impacting
operations, or where existing budget dollars can be
applied to support new IT initiatives. Using an ITAM
solution can provide the information required to make
these types of decisions.